The USDCHF pair experienced a sharp decline following a weak NFP report, with its price now near a key swing level. The US dollar fell broadly on Friday, with market expectations for the Fed now including three rate cuts by year-end, totalling 70 basis points. There is a 10% chance of a 50 basis-point cut in September, depending on the CPI report due on Thursday, which may further weaken the USD.
The US Dollar Within A Range
The US dollar remains within a range, pressured by dovish expectations of the Fed. If the anticipated rate cuts boost economic activity, it could negate future rate cuts, potentially stabilising the dollar. However, the dollar’s trend is downward, with strong data needed for a reversal. The Swiss National Bank (SNB) is on a prolonged pause, with Swiss inflation reports not meeting the 2% target. The central bank is hesitant to drop rates into negative territory, leaving the CHF reactive to other currencies’ strengths.
On the 4-hour chart, the USDCHF is close to 0.7910, a key level for buyers aiming for a 0.7985 rally, while sellers eye a breakdown towards 0.7870. Economic data releases this week, including US PPI, CPI, and jobless claims, may impact these forecasts.
The US dollar is under pressure after the August NFP report came in weak at just 110,000 jobs, pushing the unemployment rate up to 4.1%. We now see markets fully pricing in 70 basis points of Fed rate cuts by the end of this year. The upcoming CPI report on Thursday is crucial; a soft reading below the expected 0.2% monthly increase could lock in a larger September rate cut and push the dollar even lower.
We should be cautious, as speculative net short positioning on the dollar is reaching levels not seen since early 2021, suggesting this bearish view might be getting crowded. If these rate cuts successfully stimulate the economy in the coming months, expectations for further easing in 2026 could quickly disappear. This would provide a strong foundation for a dollar recovery, even if the immediate trend is down.
Swiss National Bank On The Sidelines
On the other side of the pair, the Swiss National Bank remains firmly on the sidelines, reinforced by the latest inflation data showing a 1.4% annual rate, which is far from their 2% target. They are unlikely to cut rates into negative territory, so the franc’s value is being dictated almost entirely by moves in the US dollar. This makes the upcoming US data releases the primary focus for this currency pair.
For traders expecting a bounce from the 0.7910 support level, we could consider buying short-dated call options on USDCHF with a strike around 0.7925. This offers a defined-risk way to profit from a move back towards the 0.7985 resistance. This strategy works well if we get a surprisingly strong US PPI or CPI report later this week.
Alternatively, if we believe the dollar’s downtrend will accelerate, a break below 0.7910 is the signal. A straightforward strategy is to buy put options with a strike near 0.7900 to target the 0.7870 level. This trade would be particularly attractive if Thursday’s CPI data comes in much softer than expected, confirming the market’s dovish Fed pricing.
