The US Dollar is weakening because people expect the Federal Reserve to cut rates. The USD/CHF is stabilizing above 0.8000, currently around 0.8010, showing a daily loss of 0.25%. The US Dollar Index has dipped to about 99.10, down 0.15%, due to political uncertainty and expectations for more monetary easing. Comments from President Donald Trump about Kevin Hassett being a possible replacement for a Federal Reserve position are influencing the market and pushing interest rates lower. ### Upcoming Data and Predictions Important US data is coming soon, including the ADP Employment Change report and the ISM Services PMI. Only 5,000 new jobs are expected in November, which is much lower than the 42,000 jobs added in October. This report is coming ahead of the Nonfarm Payrolls, which has been rescheduled for December 16. Many members of the Federal Open Market Committee are concerned about weak labor demand, with an 85% chance of a 25-basis-point rate cut next week. In Switzerland, inflation data for November is mixed; the Consumer Price Index decreased by 0.2% month-over-month, and the annual inflation rate is now at 0%. The Swiss National Bank is likely to keep the policy rate unchanged, with Chair Martin Schlegel suggesting that negative rates are not on the table. The USD/CHF is trading at 0.8010, below the 100-period Simple Moving Average, which serves as resistance. Immediate resistance and support levels are at 0.8100 and 0.7996, respectively. Given the current situation, the US Dollar seems to be headed for further weakness against the Swiss Franc. The market expects an 85% chance of a Federal Reserve rate cut next week, a scenario that has gained traction as inflation has decreased over the past month. This expectation is the main force pushing the USD/CHF pair towards the important 0.8000 level. The upcoming US economic data further supports this bearish outlook for the dollar. A low ADP employment figure of just 5,000 would be the weakest in recent times, indicating trouble in the labor market. This raises doubts that the Fed will postpone monetary easing, especially with the official NFP report delayed. ### Swiss National Bank’s Strategy On the other hand, the Swiss National Bank is likely to stay on the sidelines. With Swiss annual inflation at zero, there’s no urgency for them to make a move, leading to a clear policy difference with the Fed. The bank previously surprised markets with a rate cut in March 2024, showing they can lead monetary easing, but their current stance indicates a wait-and-see approach. For derivative traders, this suggests positioning for a potential drop below the 0.8000 support level. Purchasing USD/CHF put options with strike prices at 0.7950 or 0.7900 might be a smart strategy to take advantage of the downward trend. The pair hasn’t consistently dropped below 0.8000 in years, and a break could lead to a quick decline. It’s also important to watch for a spike in implied volatility leading up to the Fed’s decision next week and the postponed jobs report on December 16. These events could serve as catalysts that accelerate the current trend. Buying options now, before volatility increases, could be a good move to benefit from the expected movement. However, managing risk is vital, as an unexpected hold by the Fed could lead to a sharp reversal. If the price moves back above the 0.8039 resistance level, it would challenge the bearish outlook. Therefore, using bear put spreads could effectively define risk and reduce the cost of entry while maintaining a short position. Create your live VT Markets account and start trading now.

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