Technical Signals and Initial Strategy
The confirmed inverse head-and-shoulders pattern in USD/CHF gives us a clear bullish signal. We see the break above the neckline as a strong reason to position for further upside in the coming weeks. The flattening RSI near 65 suggests that buyers are consolidating their strength before another potential push higher. With the pair challenging the 0.8000 level, we believe buying call options is a prudent strategy to capture the expected move towards the 0.8050 target. The latest US CPI data for May, which came in at 3.1%, supports a stronger dollar as it lessens the probability of a Federal Reserve rate cut this quarter. This fundamental backdrop reinforces our technical view.Macro Backdrop and Risk Management
The strength in the US dollar is further amplified by the Swiss National Bank’s dovish stance. Recent comments from the SNB hint at a potential rate cut by September, especially with Swiss inflation now at a low 1.2%. This growing policy divergence between a firm Fed and a softening SNB is a powerful catalyst for USD/CHF. Should the 0.8050 objective be met, we will look to target the 0.8100 level next. This is similar to the trend we saw in late 2024 when a hawkish Fed hold led to a sustained dollar rally against currencies with more dovish central banks. We can use longer-dated call spreads to position for this more extended move while managing premium costs. On the other hand, we must manage our risk if the upward break fails. A drop below the 0.7950 support level would be our first signal that the bullish momentum is fading. This could be an opportune moment to purchase protective put options to hedge our long exposure.Start trading now — click here to create your real VT Markets account.
