The USDCHF pair declined after a disappointing NFP report, leading to a quick market adjustment. Initially, traders expected a 60 basis points rate cut by the end of the year, compared to 35 basis points before the report. Federal Reserve officials have suggested a potential rate cut in September, with softer data possibly influencing Fed Chair Powell’s decision at the Jackson Hole Symposium. The ISM Services PMI indicated rising prices, causing caution as we approach next week’s US CPI.

Swiss Monetary Policy

Swiss monetary policy remains stable, with the Swiss National Bank (SNB) on a long pause and no rate hikes anticipated. Recent Swiss CPI data showed a slight inflation improvement, and the market does not expect any rate cuts from the SNB. U.S. tariffs on Switzerland, originally set at 35%, are likely to decrease to 10-20%, similar to those on other countries. On the daily chart, the USDCHF trades above a crucial resistance zone, indicating potential support for a rally to 0.83. Sellers are targeting a drop towards 0.79. The 4-hour chart shows price rebounding from a minor trendline after the NFP report, with buyers looking for new highs and sellers aiming for lower lows. The 1-hour chart presents a similar outlook, with buyers eyeing 0.83 and sellers preparing for declines. Upcoming U.S. Jobless Claims figures may influence perceptions of labor market strength. After a softer jobs report, we saw the dollar sell off. However, this reaction may have been exaggerated. U.S. jobless claims remain stubbornly low, with last week’s initial claims at just 218,000, suggesting that the labor market is tighter than the report indicates. This strength creates uncertainty about the Federal Reserve’s future actions.

Rate Cuts Context

The market quickly priced in more rate cuts, but we should consider the earlier context of this year. The Fed only began cutting rates in March 2025 after inflation proved unexpectedly persistent in the second half of 2024. With the July CPI data showing core inflation still high at 3.6%, further aggressive rate cuts are not assured. In Switzerland, the situation is quieter, which provides strength to the franc. The Swiss National Bank has maintained its position for nearly a year, and with domestic inflation at a comfortable 1.5%, they see no need to change. The significant trade tariff issue with the United States was settled at 15% late last year, easing pressures on the franc. Given these mixed fundamentals, derivative traders should brace for potential volatility instead of betting on a clear direction. As USD/CHF trades between major technical levels, strategies like buying straddles or strangles could be useful. This approach would allow traders to profit from significant price movements, whether up or down, especially with next week’s CPI release looming. In the next few weeks, attention will focus on U.S. data, particularly inflation and employment figures. The Fed’s perspective at the upcoming Jackson Hole Symposium will be crucial in shaping expectations for the rest of the year. We find ourselves in a waiting game, eager to see whether persistent inflation or a weakening labor market will dictate future policy. Create your live VT Markets account and start trading now.

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