USD/CHF forecast: What next for the Swiss franc as trade deal hopes rise?

The Swiss franc rebounded against the US dollar as hopes of a deal between the US and the country continued. The USD/CHF pair was trading at 0.7990, down from this month’s high of 0.8117. It has crashed by 13% from its highest level this year. 

Swiss franc gains amid trade hopes

The USD/CHF exchange rate has been in a strong downtrend in the past few months. This retreat happened because of the overall weakness of the US dollar, with the DXY Index falling from $110 in January to $99 today. 

The dollar has crashed against most currencies because of Donald Trump’s policies on tariffs and other issues. At the same time, investors have moved to the Swiss franc because of the country’s stability and neutrality in the biggest issues globally. 

Now, there are hopes that the US will reach a deal with Switzerland soon. These hopes rose after Donald Trump met with some of the biggest business leaders in the country, including the heads of companies like Rolex, Partners Group,  and Richemont. 

The hope is that the US will lower the country’s tariff from 39% to about 15%. According to Bloomberg and Reuters, a deal is expected to be reached in the next two weeks. 

Trump imposed a large tariff against Switzerland, pointing to its $40 billion surplus with the US. This surplus comes from the exports of products like pharmaceutical products, precious metals, watches, and medical apparatus. 

Trump has always complained about Switzerland’s use of its currency to boost its exports. This, however, seem not to apply this year as the Swiss franc has jumped. 

Switzerland, on the other hand, has argued that it is a big importer of US goods and services. 

Federal Reserve and Swiss National Bank policies

The USD/CHF exchange rate has pulled back in the past few months because of policies by the Federal Reserve and the Swiss National Bank (SNB).

The Fed has slashed interest rates once and policymakers have hinted that they will deliver more cuts in the coming months. Polymarket traders have placed the odds of a December rate cut at 75%.

Meanwhile, the SNB has maintained a dovish tone as it delivered two interest rate cuts twice, bringing the benchmark rate to 0.0%. Officials have hinted that they may move to negative interest rates now that the country’s inflation has dropped to 0.22%.

USD/CHF technical analysis

The daily timeframe chart shows that the USD to CHF exchange rate has pulled back from the year-to-date high of 0.9200 to the current 0.800. It has moved below the 50-day and 100-day Exponential Moving Averages (EMA), a sign that bears are in control.

The pair has formed a bearish flag pattern, which normally leads to more downside. Also, the Relative Strength Index (RSI) and the MACD have pointed downward. 

Therefore, the pair will likely continue falling, with the next key target being at 0.7860. A move below that level will point to more downside, potentially to the psychological level at 0.7800.