The USD/CHF pair has increased to near 0.7915, despite predictions of a bearish outlook influenced by expected Fed interest rate cuts. The pair witnessed a rise from 0.7860, a three-month low, even as the Federal Reserve is anticipated to reduce rates by at least 50 basis points in 2026.
The CME FedWatch tool indicates a 73.3% probability of this rate reduction happening. The Fed’s projections foresee the Federal Funds Rate reaching 3.4% by the end of 2026. Additionally, changes in leadership at the Fed could lead to a more aggressive monetary easing policy in 2026.
Swiss Franc Movement
The Swiss Franc is experiencing a marginal decrease as the week commences. USD/CHF trades higher near 0.7915, close to its three-month low of 0.7830. The 20-day Exponential Moving Average (EMA) at 0.7966 limits rebounds, maintaining pressure on the pair.
The 14-day Relative Strength Index (RSI) at 31 indicates weak momentum. Bearish momentum would persist if prices remain below the 20-day EMA, and closing below the September 17 low of 0.7830 could add downside pressure.
The current bounce in USD/CHF towards 0.7900 looks like a minor correction in a larger downtrend. We see the Federal Reserve’s dovish stance as the main driver, with strong market expectations for significant rate cuts in 2026. This environment makes it challenging to be bullish on the US Dollar against the Swiss Franc.
The Fed’s position is reinforced by the latest US Personal Consumption Expenditures (PCE) data from November 2025, which came in at an annual rate of 2.6%, well within a comfortable range. This data supports the market pricing in over a 70% chance of at least 50 basis points in cuts next year. Meanwhile, the Swiss National Bank, having been one of the first major central banks to cut rates back in 2024, now has less pressure to ease aggressively.
Derivatives Trading Strategies
For derivatives traders, this suggests strategies that benefit from a falling or stagnant USD/CHF price. We can look at buying put options or establishing bear call spreads, using the 20-day EMA around 0.7966 as a key resistance level for setting strike prices. The low trading volume typical of the year’s end might offer attractive premiums, but we should be cautious of sudden price gaps.
A sustained break below the September 2025 low of 0.7830 would confirm the bearish trend and could open the door to further downside. While the RSI is near oversold levels at 31, suggesting a potential for short-term bounces, any strength is likely to be a selling opportunity as long as we remain below that key moving average. This weak momentum reinforces our bearish outlook heading into the first weeks of 2026.
