USD/CHF breaks consolidation to downside on renewed safe-haven demand

[Redator]

Trading in the region of ~0.81694, a decisive move in this morning’s trading sees USD/CHF surpass monthly lows and break previously held consolidation to the downside. Amidst an increase in general safe-haven demand, trade tariff uncertainty, mixed US economic data, and a dovish stance from the SNB weighs on dollar-franc price action.

USD/CHF: Key Takeaways

• Breaking down in this morning’s trading, USD/CHF trades 0.71% lower, facing further selling pressure amid an increase in demand for safe-haven assets
• US trade policy, especially regarding uncertainty on future inflation and economic growth, is adding to USD/CHF selling pressure
• While the Federal Reserve remains committed to a ‘wait-and-see’ approach to monetary policy, the SNB has openly discussed negative rates to combat deflationary pressures, potentially limiting franc upside

USD/CHF loses ground on continued US trade policy uncertainty

Renewing tariff fears courtesy of a recent spat with the European Union, USD/CHF remains at the mercy of the success, or lack thereof, of tariff negotiations in the coming month.

With recent progress failing to inspire market confidence, negotiation deadlines now loom, the most significant being the 90-day deferral of far-reaching ‘reciprocal’ tariffs scheduled to expire July 8th.

Understandably, President Trump will likely want to show he’s firm on deadlines to promote serious negotiations, but given past deferrals, some might question his resolve.

While recent commentary from the White House suggests tariffs are “not going away,” developments in trade agreements, especially with key partners like China, are likely to remain a hot topic throughout June, with USD/CHF amongst some of the currency pairs most affected.

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An image showing the Currency Strength Tool, OANDA Global Markets, 02/06/2025.

USD/CHF: Mixed US economic data sparks further dollar weakness

While last week’s economic event calendar proved active for the United States, the resulting data has encouraged a somewhat mixed perspective on the US economy, ultimately weighing negatively on dollar value:

Tuesday May 27th, US CB Consumer Confidence, +12.3

Amongst the first high-impact events last week, US consumer confidence rose by 12.3 points in May, snapping a five-month streak of decline. Linked to the pause in higher US-China tariff rates and positive US-EU trade developments, a rising consumer confidence is typically positive for USD value.

Thursday May 29th, US Gross Domestic Product Growth Rate QoQ Q1, -0.2%

Perhaps the most significant release last week, US GDP decreased at an annual rate of 0.2% in Q1, which, despite beating expectations, remains a contraction. Some reports suggested this was primarily due to increased imports, with US companies rushing to acquire foreign goods ahead of tariffs, which may have distorted otherwise accurate economic data. Regardless, a headline GDP contraction can be interpreted as dollar-negative.

Thursday May 29th,US Initial Jobless Claims, +14,000

Exceeding analyst expectations by 10,000, 14,000 initial jobless claims were made in the week ending 24th. Purportedly remaining in a “historically healthy range”, the latest increase shows insured employment rising to its highest level in over three years, adding to the case for Fed interest rate cuts. As can be expected, this is fundamentally negative for the dollar.

Friday May 30th, US Core Personal Consumption Expenditures PI (PCE) YoY, -0.2%

Significant to future Fed policy decisions, PCE data released on Friday showed inflation continuing to slow, down -0.2% YoY in March to reach 2.5%, its lowest level since April 2021. Moving closer towards the Fed target of 2%, the resulting increase in rate-cut bets can be interpreted as generally dollar-negative.

USD/CHF: Fed and SNB policy become increasingly divergent

While the Fed remains committed to a “wait-and-see” approach to monetary policy, recent commentary from the Swiss National Bank suggests that a return to negative rates is a real possibility in their upcoming decision.

Despite cutting rates by 0.25% in March, citing “increased downside risks to inflation in the medium term,” the SNB remains under pressure from persistent deflation and a relative strengthening of the franc.

For now, a 25 BPS cut appears likely in their upcoming June 19th decision, but any further falls in USD/CHF pricing will increase bets of a 50 BPS cut, representing a potential return to negative rates for the first time since 2022.

As for USD/CHF pricing, we can expect long-term downside to be somewhat limited while the SNB maintains a more dovish stance than the Federal Reserve.

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A chart showing the recent price action of USDCHF. OANDA,TradingView, 02/06/2025

USD/CHF: Technical analysis

• In today’s session, USD/CHF has broken previously held consolidation to the downside and trades at 40-day lows. If bearish momentum continues, bears will likely target ~0.81326, then ~0.81000 before an attempt on yearly lows
• Should today’s daily candle maintain or close lower in price than current levels, the 12-26 period MACD will become decisively bearish, suggesting short-term price movement is returning to the long-term downtrend

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