USD/CHF. Analysis and Forecast

[Ben Graham]

A positive risk sentiment is undermining demand for the safe-haven CHF and helping to limit losses for the pair. However, expectations of Fed rate cuts, renewed U.S.–China trade tensions, and the ongoing U.S. government shutdown continue to put pressure on the dollar.

The USD/CHF pair is attempting to halt its decline today. U.S. dollar selling has continued for the third consecutive day amid growing concerns about economic risks linked to the prolonged U.S. government shutdown and renewed trade tensions with China. Additional downward pressure comes from dovish expectations regarding Federal Reserve policy — a key factor weighing on the dollar's exchange rate.

On Wednesday, the Senate once again failed to pass the government funding bill approved by the House of Representatives — for the ninth time. The government shutdown, which began on October 1, has now lasted three weeks. At the same time, tensions between the U.S. and China have intensified: the U.S. has expanded restrictions on the export of technological goods, while China has announced strict controls over rare earth metals — further fueling fears of a full-scale trade war.

Meanwhile, market participants are already pricing in a 25-basis-point rate cut by the U.S. central bank at two upcoming meetings — in October and December. This trend is largely supported by the dovish tone of Fed Chair Jerome Powell, who said on Tuesday that the labor market remains in a depressed state, with low hiring and firing activity. This continues to favor dollar bears.

However, the positive sentiment in equity markets is preventing the Swiss franc — a traditional safe-haven asset — from strengthening too sharply. This also helps attract buyers to the USD/CHF pair around the 0.7935–0.7930 area. Today, special attention should be paid to the speeches of several influential FOMC members, which could provide new signals and shift market dynamics during the North American session.

From a technical perspective, oscillators on the daily chart are mixed, and the Relative Strength Index (RSI) has dropped into negative territory, indicating weakness among the bulls.

Nevertheless, the pair will likely attempt to halt its decline. If it manages to break above 0.7975, prices may gain momentum to reach the 0.8000 psychological level, with 0.7990 acting as an intermediate resistance. However, failure to hold above 0.7958 could push the pair down to 0.7940. A drop below that level would mean USD/CHF losing its footing, accelerating the fall toward the 0.7900 level.

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