USD/CHF has posted gains in each of the first four months of this year. But in May trading, the pair now appears poised for its first monthly decline. Much of this will be due to today’s decline, after seeing a bounce off key support at 0.9000 earlier this month.
USD/CHF daily chart
The combination of a stronger dollar and a quick decision by the SNB to cut rates in March helped precipitate the rise in USD/CHF this year. The Swiss central bank made this decision as inflationary pressures appear to be well under control. However, uncertainty persists, as evidenced by the situation in the United States, Europe and the United Kingdom.
The SNB must therefore not be too complacent in its approach. If the franc also continues to weaken, this could lead to more inflation for the Swiss economy. And as BNS Chairman Jordan pointed out earlier here, this is the main risk they need to be wary of right now.
If they have to cut rates further, it will put more pressure on the franc. But at the same time, they hope to avoid too much of that so as not to stoke higher inflation.
The risk environment was rather gloomy earlier today and it was the perfect time for the SNB to work some of its magic. But we are now seeing mixed flows in European morning trading, even if the franc remains unfazed and is at its highest of the day.
But in the case of USD/CHF, there is still key support closer to 0.9000 at this point. As long as this holds, the pair can still maintain more bullish momentum overall.
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