The USD/CHF pair is trading around 0.7950, supported by a strong US Dollar. Expectations for a Federal Reserve rate cut in December have decreased, with the chance of a 25-basis-point cut now at 46%, down from 67%. Support for the Swiss Franc is rising. The Swiss National Bank is expected to keep its policy rate at 0% in December, as a slight increase in inflation is predicted. This is further supported by a new tariff agreement with the United States, which lowers duties on Swiss exports from 39% to 15%.

Nonfarm Payrolls Report

The Nonfarm Payrolls report for September will be released on November 20, but some information may still be unclear due to the government shutdown. Federal Reserve officials are worried about inflation risks, considering current rates are close to neutral. The Swiss Franc holds its ground, standing out as the strongest currency against the Australian Dollar. The government has confirmed beneficial tariff agreements, easing pressure on the Swiss economy. The heat map shows no surprises, as the Swiss Franc remains solid against major currencies. At around 0.7950, the USD/CHF pair presents a classic opportunity for derivatives traders. The strong US Dollar is pushing the pair up, while the resilient Swiss Franc limits gains. This suggests that range-trading strategies could work well in the short term, but a breakout may also be on the horizon. For the US Dollar, the market is quickly reversing bets on a December Federal Reserve rate cut. Last month’s Consumer Price Index data came in at 3.4%, higher than expected, reinforcing the Fed’s view that inflation is the main concern. The CME FedWatch tool now indicates less than a 50% chance of a cut, a significant change from a few weeks ago.

Eyes on US Jobs Data

All attention is now on the delayed US Nonfarm Payrolls report set to release this week on November 20th. Strong job growth in late 2024 had previously delayed rate cut expectations. If the report exceeds 200,000 jobs, it may push USD/CHF decisively above the 0.8000 mark. However, betting against the Swiss Franc is risky. With recent inflation in Switzerland rising to 1.9%, the Swiss National Bank is unlikely to ease its policy, providing strong support for the franc. This underlying strength could complicate any straightforward rally in the USD/CHF pair. Market conditions suggest volatility may be underestimated, especially with the VIX index low at around 14. Buying options, like straddles on USD/CHF, could be a smart move to prepare for a significant price move after the US jobs data, no matter which way it goes. This strategy benefits from a quick breakout without needing to predict the report’s outcome. For those with a directional view, call options allow for a leveraged bet on a strong US jobs report, boosting the Dollar. On the other hand, if we suspect cracks in the US economy, buying puts on USD/CHF would be a strategic choice. This way, we can manage our risk while readying for the data release that will likely determine the pair’s direction for the rest of the year. Create your live VT Markets account and start trading now.

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