USD/CHF slipped 0.2% to about 0.8085 in Friday’s European session, extending a pullback from Wednesday’s 10-month peak of 0.8140. The move came as the US Dollar weakened, with the Dollar Index near 101.35, after markets pared expectations for further Federal Reserve tightening. CME FedWatch put the probability of at least two rate hikes this year at 41.7%, down from 50.2% a week earlier, while softer oil prices followed progress in US–Iran technical talks and improved energy flows through the Strait of Hormuz, tempering inflation projections.
The Swiss Franc outperformed major peers in a cautious tone after an AI-led equity sell-off, with S&P 500 futures down 0.43% to around 7,330. Despite the dip, USD/CHF remained above the 20-period EMA at 0.8007, keeping the near-term bias bullish, while the RSI at 65.37 neared overbought levels. Immediate support sits at the March 31 high of 0.8043 and then the 20-day EMA at 0.8007; resistance is seen at the August 1 high of 0.8172 and 0.8200, contingent on a break above 0.8140.
Market Drivers And Technical Outlook
We are observing a pullback in USD/CHF to around 0.8925 after its recent strong run. This near-term weakness is driven by a combination of profit-taking in the dollar and a flight to safety benefiting the Swiss Franc. The market is currently reacting to increased volatility in global tech stocks, which is fueling this risk-off sentiment.
Recent US data shows Core PCE inflation cooling slightly to 2.6% year-over-year, reinforcing the view that the Federal Reserve may hold rates steady through the summer. Meanwhile, the Swiss National Bank’s surprise rate cut to 1.25% earlier this month shows a clear divergence in monetary policy. This fundamental backdrop suggests underlying support for the US Dollar over the Franc in the medium term.
Strategy And Positioning
Given the current dip, we believe traders could consider short-dated put options with strikes around 0.8900 to hedge against a further slide towards the 0.8850 support level. This strategy would capitalize on the immediate risk-averse mood in the market. Selling out-of-the-money call spreads for the next couple of weeks could also generate income while defining risk.
However, we view this current weakness as a potential buying opportunity for the medium term. The technical picture remains constructive as long as the pair holds above its key moving averages. The interest rate differential between the Fed and the more dovish SNB should eventually push the pair higher.
Therefore, we are looking at any dips towards the 0.8850 area to initiate bullish positions for the coming months. Buying call options with strikes around 0.9000 expiring in August or September offers a way to participate in the expected rebound. This allows for significant upside potential if the pair breaks above its recent highs near 0.8990.
The Relative Strength Index (RSI) is coming down from overbought levels, which supports our view of waiting for consolidation or a further dip. This technical signal suggests patience is warranted before establishing longer-term bullish derivative structures. We will monitor price action closely around the key support levels to time our entry.
