USD/CHF pares SNB-induced slump below 0.9700, Fed’s Powell eyed

• USD/CHF consolidates the biggest daily fall in seven years within a tight range.
• Market sentiment dwindles amid a quiet Asian session.
• SNB’s surprise 0.50% rate hike propelled CHF, broad US dollar weakness strengthened bearish bias.
• Fed Monetary Policy report, Chairman Powell’s speech will be crucial for short-term directions, yields are important too.

USD/CHF traders lick their wounds around 0.9670 after posting the biggest daily slump since 2015, led by the SNB’s surprise rate hike. The Swiss currency (CHF) pair’s latest inaction could be linked to the traders’ wait for more clues during early Friday’s quiet Asian session.

It’s worth noting that a pause in the US Treasury yields’ weakness and mildly bid US stock futures seem to have favored the quote’s latest corrective pullback from a two-week low.

That said, the US benchmark 10-year Treasury yields dropped during the last two consecutive days to 3.195% at the latest. S&P 500 Futures, on the other hand, print 0.25% intraday gains after losing around 3.25% on Wall Street.

Aggressive momentary policy actions from the Swiss National Bank (SNB) and the downbeat US data weighed on the US bond coupons, as well as the USD/CHF prices the previous day. In doing so, the Treasury yields fail to pay respect to the US Federal Reserve’s (Fed) 0.75% rate hike, the biggest move since 1994.

It’s worth noting that the SNB surprised global markets with a 0.50% rate hike on Thursday. “It cannot be ruled out that further increases in the SNB policy rate will be necessary in the foreseeable future to stabilize inflation in the range consistent with price stability over the medium term,” mentioned the SNB Statement after the rate announcement. Additionally, SNB Chairman Thomas Jordan also said that the Swiss franc was no longer highly valued because of the recent depreciation, per Reuters. "Central bank is ready to intervene in markets to check excessive appreciation or weakening of the Swiss franc," added SNB’s Jordan.

On the other hand, the US Building Permits and Housing Starts eased in May to 1.695M and 1.549M respectively while the Initial Jobless Claims 4-week average inched up to 218.5K versus 215K expected during the period ended on June 10. Further, Philadelphia Fed Manufacturing Survey printed a negative figure of -3.3 for June, the first such contraction since May 2020.

Moving on, the US Industrial Production for May, expected at 0.4% versus 1.1% prior, will join the Fed’s bi-annual Monetary Policy Report and Powell’s speech to entertain USD/CHF traders. Should Fed’s Powell defend the latest moves, the USD bulls may return to the table.

Technical analysis

Despite the latest plunge, USD/CHF remains supported by an upward sloping trend line from late March, near 0.9635 by the press time, which in turn suggests a corrective pullback towards the 50-DMA level surrounding 0.9705.