The Swiss National Bank (SNB) is set to hold its Monetary Policy Committee (MPC) meeting tomorrow. Markets expect the SNB to cut its policy rate by 25 basis points to zero.
Currently, the USD/CHF currency pair is trading around 0.8178, according to OCBC’s FX analysts Frances Cheung and Christopher Wong.
The charts suggest a possible double bottom pattern forming. This pattern often signals a bullish reversal.
The manufacturing Purchasing Managers’ Index (PMI) in Switzerland has dropped to an 18-month low of 42.1, showing widespread trouble in the sector. Production fell sharply by 7.2 points to 42.5, and the order book index declined significantly to 35.9.
Switzerland is also experiencing a strong disinflation trend. Core inflation has reached its lowest level in nearly four years, and the overall Consumer Price Index (CPI) is now negative year-over-year.
The Swiss Franc (CHF) has strengthened by 11% against the US dollar this year. Swiss officials have expressed concerns about this strong franc and have indicated they are open to cutting rates to zero or even below.
Markets are pricing in the possibility of another 25 basis point cut later this year, which could push the policy rate to -0.25%. A dovish rate cut from the SNB could boost the USD/CHF pair.
Currently, daily momentum is flat, but the Relative Strength Index (RSI) is rising. Key resistance levels are at 0.8205 and 0.8240, while support is found at 0.8040 to 0.8050, where the double bottom may form.
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