EUR/CHF is setting up for a potential bearish reversal, as Switzerland’s macro stability, trade surplus and fiscal prudence contrast sharply with Eurozone stagnation and policy divergence. Despite a brief euro relief rally, early warning signs from technicals and weakening momentum suggest that the single currency may struggle to sustain gains against the franc.

Macroeconomic Analysis

On a macro basis, Switzerland remains one of the strongest currencies in the G10. Applying the weighted macroeconomic framework:

• Inflation and Monetary Policy:
  Switzerland’s inflation has collapsed to 0.3 percent YoY, well below target, while the Swiss National Bank (SNB) maintains a modest 0.25 percent policy rate. Although dovish, this reflects true price stability.
  In contrast, Eurozone inflation remains elevated at 2.3 percent, and the ECB has begun easing, cutting the deposit rate to 2.65 percent. The shift to an accommodative stance adds weight to euro weakness.
• Growth:
  Swiss GDP grew by 0.2 percent, outperforming the Eurozone, which flatlined at 0.0 percent. Retail sales in both regions are negative, but Switzerland’s growth outlook remains more resilient given its external exposure and export strength.
• Labour Market:
  Switzerland enjoys unemployment at just 2.9 percent, compared to 6.2 percent in the Eurozone. This significant gap reflects structural labour market efficiency in Switzerland and contributes to stronger domestic fundamentals.
• Trade and External Balances:
  Switzerland posted a trade surplus of 4.3 billion CHF and a current account surplus of 6.3 billion CHF.
  The Eurozone’s external surplus has shrunk significantly, with its current account now just €13.2 billion, down from over €50 billion last year.
• Fiscal and Business Conditions:
  Switzerland leads with a budget surplus of 0.4 percent and debt-to-GDP of only 37.9 percent – by far the healthiest in the developed world.
  The Eurozone runs a -3.6 percent budget deficit and carries 87.4 percent debt-to-GDP, with member nations diverging on fiscal response.

Macro Verdict: Switzerland outperforms in all five categories. The euro remains vulnerable to slower growth and a dovish ECB.

Fundamental Analysis

• The European Central Bank’s recent rate cut has widened the policy divergence. While the SNB is also dovish, it is not under the same pressure to act, given low inflation and surplus-driven strength.
• Switzerland’s macroeconomic fundamentals are pristine, giving the franc safe-haven appeal amid global uncertainty.
• The euro’s recent strength came off the back of German fiscal stimulus aimed at boosting defence and public investment. However, the underlying economy remains fragile, and the ECB’s shift undermines medium-term euro strength.
• Markets are starting to price in continued euro underperformance, especially against structurally strong currencies like CHF.

Sentiment Analysis

• While detailed retail positioning data for EUR/CHF is limited, broader positioning suggests mild euro optimism following Germany’s stimulus plan.
• However, institutional sentiment toward CHF remains strong, particularly as risk conditions globally remain fragile.
• With the ECB turning dovish and Swiss fundamentals unchanged, medium-term sentiment still favours CHF strength — particularly if equity markets turn volatile and risk-off flows return.

Technical Analysis

Daily chart analysis reveals early signs of reversal after a bullish run:

• Ichimoku Cloud:
  • Price remains above the Kumo, but Tenkan-Sen (0.9591) is flattening while price is consolidating just above the cloud.
  • The Chikou Span is above price and the cloud, which remains a bullish structure, but momentum is fading.
  • The future cloud remains bullish (Span A > Span B), but is flattening — suggesting trend exhaustion.
• RSI:
  • RSI has pulled back to 54.56, down from recent highs near 70.
  • This signals a loss of bullish momentum, and the RSI-based moving average at 62.00 adds further downside bias.
• MACD:
  • MACD line and signal line are flattening, and the histogram is near zero — suggesting momentum neutralisation and potential for a bearish crossover.
• Volume:
  • Volume has declined over recent sessions, indicating buyer fatigue.
• Candlestick/Price Action:
  • Recent candles show lower highs and weak closes, indicating distribution and lack of bullish follow-through.

Conclusion: While the longer-term trend remains mildly bullish, the technical setup now leans bearish, supported by RSI divergence, MACD flattening, and stalling price action.

Conclusion

EUR/CHF is at risk of reversal, driven by:

• Switzerland’s dominance in inflation control, fiscal health, trade balance, and labour markets.
• A dovish pivot by the ECB as growth stagnates in the Eurozone.
• Technical indicators pointing to fading bullish momentum and possible correction.
• Broad market preference for currencies backed by strong fundamentals and low volatility — such as the Swiss franc.

Outlook: Cautious Bearish EUR/CHF

Ready to turn insights like these into real trades?

Join our CPD Accredited trading courses at Traders MBA to learn how to integrate macroeconomics, sentiment, and technical analysis into a robust institutional-grade framework. Discover how professionals build conviction and structure trades — from the ground up.