USD/CHF rallies above 0.97 on FOMC decisions & Yellen's presser

The USD/CHF pair added more than 100 pips on the back of the hawkish FOMC statement and touched its highest level in more than a month at 0.9716. As of writing, the pair was trading at 0.9695, gaining 0.7% on the day.

As anticipated, after its 2-day meeting, the FOMC announced that it was going to start unwinding its massive balance sheet in October. "The limit on reinvestment is scheduled to increase by $10 billion every three months to a maximum of $50 billion per month until the central bank’s overall balance sheet falls by perhaps $1 trillion or more in the coming years," Reuters reported. More importantly, the details of the updated economic projections revealed that 11 of 16 policymakers saw another 25 basis points rate hike before the end of the year appropriate.

• Plotting the dots: Fed generally more upbeat - ANZ
• FOMC is still aiming for a third hike before the end of the year - Rabobank

During the press conference following the statement release, Janet Yellen, Chairwoman of the Federal Reserve, said that inflation was expected to move and stabilize around 2% by next year and further added that gradual rate hikes were still warranted. Regarding the recent slowdown in inflation growth, Yellen argued that this year's shortfall was reflecting developments unrelated to broader conditions.

• DXY +92%: shorts repositioning in a major way on bullish Yellen / hawkish FOMC

The US Dollar Index rose to its highest level since last Thursday at 92.49 and started the consolidate its gains as markets started to calm down. At the moment, the index was up 0.7% at 92.25. However, with Asian traders entering the markets in the next hours, the greenback could extend its gains against its competitors. 

Earlier today, the SNB released its quarterly bulletin, in which it highlighted that despite a recent weakening against the euro, the CHF was still overvalued and the bank was ready to in the foreign exchange market as necessary.

Technical outlook

With this latest upsurge, the RSI indicator on the daily graph turned north above the 50 mark, signaling a buildup in bullish momentum. The pair could face the first hurdle at 0.9765 (Aug. 16 high), 0.9810 (May 30 high) and 0.9900 (psychological level). On the downside, supports align at 0.9635 (100-DMA), 0.9580 (20-DMA) and 0.9500 (psychological level).