The USD/CHF currency pair has seen persistent weakness in recent weeks, driven by softer US inflation and a policy pivot from the Swiss National Bank (SNB). However, a deeper examination of macro fundamentals, market sentiment, and technical conditions reveals that the US dollar may be approaching a strategic turning point against the Swiss franc. This article analyses the trade idea in detail and presents the case for a potential USD/CHF rebound in the coming sessions.

Fundamental Analysis

Monetary Policy and Inflation
The Federal Reserve has held its policy rate steady at 4.5 percent, signalling a data-dependent approach. While YoY inflation has moderated to 2.4 percent, monthly inflation came in at -0.1 percent, offering some disinflationary comfort. However, strong retail sales growth (+1.4 percent MoM) and robust services demand may keep core inflation elevated.

In contrast, the SNB surprised markets by cutting its policy rate to 0.25 percent, citing persistent disinflation. With Swiss inflation at 0.3 percent YoY and flat MoM, the central bank has room to ease further if growth falters — opening a clear divergence in policy outlook between the Fed and SNB.

This differential places the USD at a strong yield and policy advantage, as the SNB’s easing bias contrasts sharply with the Fed’s cautious but firm stance.

Growth and Labour Market
The US economy expanded by 2.4 percent QoQ, with 2.5 percent annual growth — among the strongest in the G7. The labour market remains resilient, with unemployment at 4.2 percent, close to the Fed’s definition of full employment.

Switzerland’s GDP growth is just 0.2 percent QoQ, and 1.5 percent YoY. While the unemployment rate is low at 2.9 percent, forward momentum in growth and consumption is lacking.

Trade and External Balance
Switzerland maintains a robust current account surplus of 7.6 percent of GDP, one of the highest globally. The US, by contrast, has a current account deficit of -3.9 percent of GDP, reflecting its persistent reliance on external capital flows.

Although this supports CHF structurally, in the short term, the combination of policy divergence and relative growth differentials is likely to drive capital flows back into the dollar.

Fiscal Metrics and Business Activity
The US budget deficit widened to -6.2 percent of GDP, and government debt remains high at 122 percent of GDP. Despite these weaknesses, business activity indicators remain supportive:

• Services PMI: 54.4 (expansionary)
• Business Confidence: 49 (just under neutral)

Switzerland’s metrics are more conservative:

• Budget surplus: +0.4 percent of GDP
• Debt-to-GDP: 37.9 percent
• However, consumer confidence collapsed to -35, and Manufacturing PMI is in contraction at 48.9.

Sentiment Analysis

COT Positioning

• USD: Net speculative positions remain net long, reflecting broad institutional confidence in the greenback’s resilience.
• CHF: Speculators have moved to net short, driven by the SNB’s dovish pivot and expectations of lower carry returns.

Business and Consumer Sentiment

• US consumer sentiment remains stable at 50.8, while business confidence has softened but holds near neutral.
• In Switzerland, sentiment has deteriorated sharply:
  • Consumer Confidence: -35 (lowest among majors)
  • Business Confidence: 104 (resilient but possibly lagging)

Market Bias and Yield Flows

• The USD benefits from carry demand and policy divergence, particularly as the SNB looks to stimulate a slowing economy.
• While the CHF benefits from haven status, this flow has diminished in recent weeks as risk appetite improves globally.

Forward Indicators

• Retail sales, services PMI, and labour market data all support further USD upside.
• CHF sentiment may be deteriorating more rapidly than markets have priced in.

Technical Analysis

The daily chart for USD/CHF shows a market that is deeply oversold, but not yet confirmed as reversing. However, several signals point to a potential bottoming process underway.

Ichimoku Cloud

• Price is well below the Kumo, confirming a strong existing downtrend.
• Tenkan-Sen (0.83522) and Kijun-Sen (0.84816) sit above price, acting as overhead resistance.
• Future Kumo is bearish, with Span B above Span A — however, the span is beginning to narrow.
• Chikou Span remains below price and the Kumo — no reversal confirmed yet.

RSI and MACD

• RSI at 27.93: Deeply oversold, suggesting short-term exhaustion in selling pressure.
• MACD: Still bearish, but the histogram is shrinking — signalling loss of downside momentum.

Volume and Price Action

• Recent sessions show small-bodied candles and lower wicks — classic signs of selling exhaustion.
• Volume spikes indicate possible accumulation as price stabilises near key historical support.

Conclusion: While USD/CHF remains in a downtrend, the confluence of oversold RSI, weakening MACD, and stabilising price action signals a likely corrective bounce or early-stage reversal. A daily close above the Tenkan-Sen would be an early bullish signal.

Outlook Summary

Trade Bias: Long USD/CHF (Cautious)
Conviction: Moderate – macro and sentiment support a rebound, but technical confirmation is still pending

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