Key Moments
- USD/CHF trades near 0.8130, extending gains for a second straight session as risk aversion boosts demand for the US Dollar
- Heightened Middle East tensions and higher US yields and oil prices fuel concerns about another potential Federal Reserve rate hike
- Subdued Swiss inflation at 0.4% and a 0.00% SNB policy rate keep the Franc under pressure as the weakest G10 currency this quarter
Geopolitical Stress Fuels Demand for the US Dollar
USD/CHF continues to advance for a second consecutive day, trading around 0.8130 during Asian hours on Friday. The pair is supported by renewed safe-haven interest in the US Dollar as worries intensify over the situation in the Middle East.
Sentiment has been unsettled by increasing doubts over the reopening of the key Strait of Hormuz. According to reporting by The Guardian, Saudi Arabia plans to prolong military operations against Iran-aligned Houthis in support of the internationally recognized Yemeni government, following attacks on its southern Najran province. At the same time, Iran’s parliament is considering a draft bill that would bar US and Israeli vessels, enforce a 20% cargo surcharge on hostile countries, and limit use of the corridor until the US blockade is lifted.
Fed Path in Focus as Yields and Oil Prices Rise
US Treasury yields and crude oil prices have been moving higher, rekindling worries that the Federal Reserve could deliver another interest rate increase next month. Despite these inflation-related concerns, the CME FedWatch Tool currently indicates a 54.5% chance of a 25-basis-point hike in September, down from 63.4% a week earlier.
Market participants are now closely awaiting the July Nonfarm Payrolls (NFP) release for further insight into labor market conditions and the possible direction of upcoming Fed decisions.
Swiss Macro Data Mixed as Inflation Stays Muted
Swiss economic data present a somewhat uneven picture. The non-seasonally adjusted unemployment rate in Switzerland inched up to 3.0% in July from 2.9% in June. Youth unemployment, covering ages 15-24, also rose marginally to 2.8%. Investors will be monitoring the publication of July Foreign Currency Reserves and Q3 SECO Consumer Climate figures later in the session.
Franc Under Pressure with SNB Seen on Hold
Brown Brothers Harriman notes that “Swiss July CPI stays muted,” with headline inflation running at just 0.4% year-on-year and core at 0.3% for a fourth consecutive month. With the Swiss National Bank (SNB) projecting only modest CPI averages and keeping its policy rate at 0.00%, strategist Elias Haddad suggests that this soft inflation setting is likely to keep the Swiss Franc under pressure, pointing out that it is the weakest G10 currency this quarter.
USD/CHF Technical Picture: Bullish Tone Above Key Averages
On the daily chart, USD/CHF is holding a mildly constructive short-term bias, trading above both the nine-day and 50-day Exponential Moving Averages (EMAs). The positioning of these shorter- and medium-term EMAs beneath the spot price supports a favorable technical structure, while the 14-day Relative Strength Index (RSI) near 54 signals neutral-to-positive momentum rather than stretched conditions.
| Technical Level | Description | Level |
|---|---|---|
| Immediate resistance | Horizontal barrier near 13-month high | 0.8207 |
| First support | Nine-day EMA | 0.8111 |
| Second support | 50-day EMA | 0.8056 |
| Deeper support | Area near almost five-month low | 0.7762 |
On the upside, the next key obstacle is the horizontal resistance close to the 13-month peak at 0.8207. On the downside, initial support is seen at the nine-day EMA at 0.8111, followed by the 50-day EMA at 0.8056. More substantial support is located around the area of an almost five-month low at 0.7762.
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