USD/CHF climbed to a 16-month high on Thursday after the Swiss National Bank kept its policy rate at 0%, leaving the Swiss Franc weaker. The pair was trading near 0.8275, up 0.27% on the day, supported by a firmer US Dollar as markets priced in additional Federal Reserve tightening. The SNB reiterated that policy remains appropriate to keep inflation within its mandate of less than 2% per annum, even as its inflation projection was raised slightly due to higher oil-product prices; projections still sit below 1% across the forecast horizon. The bank also pushed back against market expectations of 50 to 75 bps of hikes over the next 12 months.
Technically, USD/CHF remains above the 50-day, 100-day and 200-day Simple Moving Averages, clustered between roughly 0.8120 and 0.7950. Momentum is elevated: the 14-day RSI is near 68 and the MACD stays positive, leaving room for a pullback if conditions become overstretched. Support levels are seen at 0.8200, then 0.8122, 0.8045, 0.7947 and 0.7800, while resistance is capped around 0.8350.
Trading Strategies and Bullish Considerations
We suggest derivative traders maintain a core bullish bias on USD/CHF but prepare for immediate volatility as the pair trades near 0.8275. With the Swiss National Bank holding its policy rate at 0% while the Federal Reserve remains comparatively hawkish, the widening yield gap makes long USD positions highly attractive. However, with the daily Relative Strength Index (RSI) stretching to 68, near-term buyers should brace for a potential technical pullback.
To navigate this overbought risk, we recommend using bull call spreads rather than buying outright spot contracts to limit upfront premium costs. This strategy limits risk while allowing participation in a rally toward the immediate resistance barrier at 0.8350. Alternatively, writing put options near the key support level of 0.8200 can help traders pocket premium while establishing entry points at a discount.
Yield Spread Drivers and Long-Term Outlook
Historically, when the yield spread between US and Swiss bonds expands past 300 basis points, the Swiss Franc faces sustained downward pressure. With US 10-year Treasury yields currently sitting near 3.8% and Swiss 10-year yields hovering around 0.4%, the carry trade incentive is too strong for markets to ignore. For longer-term traders, holding long-dated call options remains a viable macro play as long as USD/CHF stays above its 200-day Simple Moving Average at 0.7947.
If the market momentum pushes USD/CHF cleanly above the 0.8350 resistance level, we expect a rapid acceleration toward multi-year highs. Traders should consider setting buy-stop orders just above this barrier to catch the breakout momentum. However, keep stop-losses tight to protect against sudden Swiss National Bank interventions, which have historically been deployed to stabilize extreme currency swings.
