The USD/CHF exchange rate has been up for four consecutive weeks and has been sitting at its highest level since July 2024, as US bond yields and the dollar surge. The pair rose to a high of 0.9071 on Tuesday, up by 7. It has formed a highly bullish inverse head-and-shoulders pattern, pointing to more gains in 2025.
USD/CHF technical analysis
The weekly chart shows that the USD to CHF exchange rate has been in a strong uptrend this year. It has moved above the 38.2% Fibonacci Retracement level at 0.9000.
The pair has moved above the 50-week and 100-week Exponential Moving Averages (EMA), a popular bullish sign. It has also formed an inverse head-and-shoulders chart pattern, which is often a sign of a bullish reversal. This pattern consists of a head at 0.8300 and right and left shoulders around 0.8500.
The neckline of this pattern is at the 50% Fibonacci Retracement level at 0.9200. Therefore, there are rising odds that it will continue rising, with the next point to watch being at the 61.8% retracement point at 0.6445, which is about 4.56% above the current level. The stop-loss of this trade will be at the psychological point at 0.8800.
Strong US dollar index
The USD/CHF pair has soared, helped by the roaring US dollar, which has jumped against most currencies. The US dollar index, which measures the greenback’s performance against a basket of currencies, has risen from the year-to-date low of $100 to $107.
Data shows that the USD has soared against most developed and emerging market currencies this year. For example, the EUR/USD pair is on a path towards parity after crashing in the past few weeks because of the Fed and ECB’s divergence.
The NZD/USD pair has crashed for five consecutive weeks, a trend that may continue in the coming weeks. In the emerging markets, the Turkish lira, the Brazilian real, and the Indian rupee have all crashed to their record lows.
The US dollar has jumped against the Swiss franc because of the Federal Reserve’s recent hawkish stance. In a statement this month, the bank slashed interest rates by 0.25% and predicted two more cuts in 2025.
Historically, these Fed guidances should be taken with a grain of salt since officials always react to incoming data. For example, officials guided towards at least four cuts in 2024 and implemented three.
The Fed is concerned that Trump’s policies will lead to more inflation, requiring a tighter policy. This explains why the US bond yields have jumped recently.
Swiss National Bank decisions
The USD/CHF exchange rate has continued rising due to the relatively dovish Swiss National Bank (SNB). The bank has been battling a strong Swiss franc for some time and slashed interest rates to 0.50% this month as inflation continued falling.
Recent economic data showed that the headline inflation continued falling from 1.1% in August to 0.7% in November. The bank also anticipates that the economy will grow by about 1% in 2024, helped by its interest rate cuts, and by between 1% and 1.5% in 2025. Switzerland is also going through deflation as inflation has remained below 1%.
Still, in the long term, there is a likelihood that the Swiss franc will continue to do well because of the strength of the economy. Also, Switzerland is a safe country, with a debt-to-GDP ratio of just 38.30%. This is a small figure compared to most other countries, including neighboring France and Germany.
Switzerland, unlike the United States, is also a neutral country that is not at conflicts with other countries. As such, it is likely to continue seeing more inflows in the future as geopolitical risks rise.
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