USD/CHF at 2-week highs above 0.9900, Swiss Franc hit by ECB

The USD/CHF pair continued to rise during the American session and peaked at 0.9917, the highest level since July 10. Near the end of the day, it is hovering above 0.9900, consolidating most of the day’s gains. 

The dovish tone from the European Central Bank (ECB) triggered the initial rally of USD/CHF amid a decline across the board of the Swiss franc. The euro also lost ground after the statement, but the worst was the Swiss. Later, the euro rebounded in the market, but CHF remained weak, unable to trim losses. 

The ECB decided to keep its rates unchanged and hinted at a stimulus package at the next meeting. “Markets expectations for an ECB depo rate cut in September is hovering around 95%. The ECB decided to keep its rates unchanged but reinforced its forward guidance to say that it expects rates to remain at their present or lower levels at least through the first half of 2020. Draghi stated that there are mixed signs with resilient indicators supporting consumption, whereas the manufacturing is notably deteriorating and indicators of inflation expectations have declined”, said BBVA analysts.

With the ECB going for more easing, market participants appear to be expecting the same regarding the Swiss National Bank. At one point of the day, Switzerland’s entire government bond market traded with negative yields. Later, yields reversed, and the 50-year rose back to 0.05% from negative territory. 

From a technical perspective, the short-term outlook turned bullish with USD/CHF holding above 0.9900 and also on top of critical daily moving averages. The next strong resistance might be seen at 0.9930 and 0.9950 (July high).