USD/CHF Hits Five-Day High as Fed Rate Hike Expectations Surge
The US Dollar (USD) continues to gain strength against the Swiss Franc (CHF), extending its winning streak for a fifth consecutive day. The USD/CHF pair is trading around 0.8191, near levels last seen on July 29. This uptrend comes ahead of the Federal Reserve's (Fed) monetary policy announcement on Wednesday.
The US Dollar Index (DXY) has risen by 0.11% to 99.60, close to a two-week high. Markets are nearly fully pricing in a 25-basis-point rate hike, which would be the first increase since 2023. The elevated oil prices due to the Middle East conflict are adding to inflationary pressures and boosting US Treasury yields.
This environment is keeping the Swiss Franc (CHF) vulnerable to further losses. Switzerland's low-inflation environment has allowed the Swiss National Bank (SNB) to maintain its policy rate at 0%. The wide interest rate differential is encouraging investors to use the CHF as a funding currency, driving flows towards higher-yielding currencies like the USD.
The technical analysis suggests firming upside momentum in USD/CHF. The Relative Strength Index (RSI) is around 64 and the Moving Average Convergence Divergence (MACD) line is rising positively. However, the pair is approaching nearby resistance and may face consolidation if gains stall.