USD/CHF currency pair surges to approximately 0.8090 in early trading in Europe on Tuesday as US-Swiss trade tensions rise and investors expect a rate cut by the Federal Reserve in September. The Swiss Franc dipped after the US imposed a significant 39% import duty on Swiss products, pressuring Switzerland’s significant exports. Though this shock of trade helps support the US Dollar, dovish statements by Fed officials and a lower-than-expected US Nonfarm Payrolls report indicate a possible cut in rates in the future, which would cap further upside in the pair. All attention now waits for the next US ISM Services PMI data for new direction.
KEY LOOKOUTS
• The 39% US import tariff on Swiss imports, scheduled to be imposed from August 7, could continue to put pressure on the Swiss Franc and shape USD/CHF dynamics.
• Markets are factoring in an 84% chance of a 25 bps rate cut by the Fed in September, after poor US labor data and dovish Fed rhetoric.
• Investors look to the release of July’s ISM Services PMI later today for new insights on the health of the US economy and the direction of policy.
• The willingness of Switzerland to offer a “more attractive offer” in trade negotiations will influence CHF sentiment if a deal is agreed before the tariff deadline.
The USD/CHF exchange trades firmer at 0.8090 in early European trading on Tuesday with tensions ramping up between Switzerland and the US. The news of a 39% US tariff on Swiss imports has pinned the Swiss Franc, providing upward strength to the pair. Meanwhile, speculation over a possible Federal Reserve rate cut in September—driven by lackluster US Nonfarm Payrolls data and dovish Fed comments—is limiting upside for aggressive gains on the US Dollar. With both trade news and monetary policy expectations in the limelight, market players now look toward the release of the US ISM Services PMI for additional cues.
USD/CHF rises to 0.8090 due to increasing US-Swiss trade tensions and a downgraded Swiss Franc. US Fed rate cut anticipations and future US ISM Services PMI releases can affect the pair’s future direction.
• USD/CHF peaks at 0.8090 during initial European trading, fueled by US trade measures.
• US slaps 39% tariff on Swiss imports, putting pressure on the Swiss Franc.
• Swiss government indicates willingness to renegotiate a more favorable trade agreement with the US.
• Soft US NFP numbers fuel speculation of rate cut by the Fed in September.
• 84% chance priced in for a 25 bps Fed rate cut, according to CME FedWatch Tool.
• Fed’s Daly suggests approaching rate cuts as signs of slowing job market emerge.
• US ISM Services PMI data awaited by markets for additional signals on economic well-being.
The USD/CHF pair picked up momentum as the US initiated a draconian 39% import tariff on Swiss goods, decisively affecting Switzerland’s export industry. This surprise action has diluted the Swiss Franc and lent strength to the US Dollar in early European trading. In response, the Swiss government signaled openness to offering a more compelling offer to the US in a bid to ease trade tensions. The uncertainty of whether both countries will come to an agreement prior to the August 7 deadline has introduced volatility into the market, however.
USD/CHF DAILY PRICE CHART
SOURCE: TradingView
Meanwhile, attention is centered on the changing dynamics for US monetary policy. The most recent US Nonfarm Payrolls numbers missed forecasts, implying slowing labor market conditions. This has raised mounting speculation that the Federal Reserve could start reducing interest rates as soon as September. Such views have been echoed by Fed policymakers, with San Francisco’s Mary C. Daly among them, who stressed the requirement for policy changes in response to easing economic conditions. Investors are now looking forward to the publication of the US ISM Services PMI for additional information regarding the health of the economy.
TECHNICAL ANALYSIS
USD/CHF is in positive ground around the 0.8090 level, showing short-term bullish inclination. The pair is aided by the recent breakout from the important resistance levels, as momentum indicators such as RSI remain above the 50 level, indicating ongoing buying interest. Nonetheless, traders need to be on the lookout for possible resistance at the psychological 0.8100 level, while any downward correction will probably find support in the 0.8050 area. Broader action over 0.8100 might provide the way forward for additional near-term gains.
FORECAST
If US-Swiss trade tensions continue unresolved and the Swiss government does not get a better deal, the Swiss Franc could continue to be under pressure, possibly sending USD/CHF beyond the 0.8100 threshold. A higher-than-anticipated US ISM Services PMI reading may also power the US Dollar further, adding to the bullish momentum for the pair. In such a scenario, the next major resistance levels may be tested, with speculators looking at the 0.8130 and 0.8160 regions as possible short-term targets.
Conversely, if Switzerland is able to sign a trade deal with the US or if US economic data in the days ahead falls short of expectations, USD/CHF may come under selling pressure. Another risk aversion wave or heightened Fed rate cut bets could also bear on the US Dollar, sending the pair lower. Here, a dip below the 0.8050 support may unlock the way for 0.8000 and possibly lower to 0.7975 in the near term.
