Swiss Franc struggles as SNB dovish stance lifts USD/CHF

USD/CHF gains ground after two days of losses, trading around 0.8310 during Asian hours on Monday. The currency pair is finding upward support as the Swiss Franc (CHF) remains under pressure from short positions. This weakness stems from market expectations that other major central banks will continue monetary tightening, while the Swiss National Bank (SNB) maintains a contrasting stance.

The SNB held its key interest rate unchanged at 0% in September. Reinforcing this dovish outlook, Vice Chairman Martin stated that no adjustment is currently needed, pointing to low, stable inflation and limited spillover risks as evidence that the Swiss economy is functioning very well.

Analysts at UOB Group reiterate that USD/CHF remains in a consolidation phase, noting that in their most recent narrative from October 2, spot at 0.8310, they had highlighted that USD “has likely entered a range-trading phase between 0.8245 and 0.8365.” They add that although USD “traded in a relatively quiet manner over the past couple of days, we will maintain our view for now,” keeping the short-term outlook anchored within that defined range over the next one to three weeks.

However, further gains in the USD/CHF pair may be constrained by a weakening US Dollar (USD), driven by softening domestic economic sentiment. This downturn was highlighted by the University of Michigan's Consumer Sentiment Index, which declined to 46.3 in October—down from 48.1 in September and missing market forecasts of 47.6.

According to the CME FedWatch tool, the probability of a rate hike of at least 25 basis points this month dropped to 17.7%, down from 24.4% the previous week. In contrast, market participants are strongly pricing in an 84.1% chance of a rate increase at the Fed's December meeting.

Traders may adopt caution as energy market concerns have resurfaced following geopolitical developments in the Middle East. US President Donald Trump indicated he is considering joining Saudi Arabia in its military campaign against Iran-backed Houthi militants in Yemen, following another deadly attack on Riyadh's international airport.

Technical Analysis:

In the daily chart, USD/CHF trades at 0.8310, holding a constructive bullish bias as spot remains above both the short- and medium-term Exponential Moving Averages (EMAs). The nine-day EMA sits just beneath the market, while the 50-day EMA lies lower, suggesting a layered demand zone cushioning pullbacks. The 14-day Relative Strength Index (RSI) around 60 hints at positive but not overstretched momentum, allowing for further upside as long as price holds over its immediate EMA support.

On the downside, initial support is located at the nine-day EMA near 0.8307, with a deeper floor at the 50-day EMA around 0.8196 should a broader correction unfold. With no nearby technical resistance levels from this dataset, continuation higher appears favored while the pair defends these EMAs, though traders may look to emerging swing highs on the chart for the next upside reference points.