- The widening U.S.–Swiss interest rate differential is supporting USD/CHF, with the Swiss National Bank wary of franc strength.
- The outlook remains bullish, with pullbacks seen as buying opportunities above key support levels.
I've been doing a lot of analysis on this pair for a while now, mainly due to the fact that I think there's a huge opportunity brewing, and in fact, have been taking advantage of it for several months. This lies in the interest rate differential between the two economies that will continue to be extraordinarily wide, even if the Federal Reserve does cut once or twice.
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As we stand here on the precipice of the end of the year, the Federal Reserve is expected to cut rates. But the question is how often and how much, because Jerome Powell has put a little bit of a dampening effect on the expectations. Back in September, the US dollar was, for the most part, in a freefall, not only against the Swiss franc, but against multiple other currencies. During the press conference, Jerome Powell suggested that the rate cut cycle wasn't an automatic thing. And with that being the case, we've seen the US dollar strengthen since then. Now, granted, against the Swiss franc, it's been a lot choppier, but that makes sense because there's been a lot of fear out there. And of course, the Swiss franc is a safe currency.
SNB Stance and Key Bullish Factors
That being said, the Swiss National Bank has said more than once that they're getting a little concerned about the strength of the franc, and if there's one central bank that will jump in and intervene, it's the Swiss National Bank. Because of this and the fact that the US economy is slated to strengthen in 2026, at least in the first half, I think the US dollar continues to outperform many other currencies.
If we can break above the 0.8150 level, we could really take off. In the meantime, short-term pullbacks continue to offer buying opportunities with the 0.8 level offering support, followed by the 0.79 level, which I think is your floor, as dictated by the Swiss.
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