USD/CHF printed a bullish engulfing pattern and rose more than 0.58% on Tuesday. It moved above the 50-day simple moving average at 0.7868 and was trading at 0.7890, just below 0.7900.
The pair rebounded after hitting a near two-month low of 0.7761 on 8 May. It has edged higher alongside a US dollar move to five-week highs on the US Dollar Index (DXY), supported by higher US Treasury yields.
Technical Levels And Momentum
The Relative Strength Index (RSI) points to bullish momentum. A move above 0.7900 would bring the 200-day SMA at 0.7916 into view, followed by resistance at 0.8000 and the 15 January high of 0.8041.
The Swiss Franc (CHF) is Switzerland’s currency and is among the top ten most traded currencies. From 2011 to 2015 it was pegged to the euro, and the removal of the peg led to a rise of more than 20% and market turmoil.
The Swiss National Bank meets four times a year and targets inflation of less than 2%. Some models put the EUR/CHF correlation at more than 90%.
Looking back to last year, around May 2025, we saw a bullish engulfing pattern signal a move towards 0.7900 for USD/CHF. That rally was fueled by a strong US Dollar and rising Treasury yields. The market has shifted considerably since then, as the pair now trades near 0.9150.
Shifting Policy Divergence
The primary driver has now become the divergence in central bank policy. The Swiss National Bank has adopted a more hawkish tone, hiking rates in March 2026 to address stubborn inflation, which recent data shows is still at 2.4% annually. This has provided a strong undercurrent of support for the franc.
On the other hand, the US Federal Reserve appears to have paused its tightening cycle, with markets pricing in potential rate cuts later this year. The latest US CPI report from April 2026 showed inflation cooling to 2.9%, reinforcing the view that the dollar’s upward momentum is fading. This creates a compelling case for a potential reversal or stabilization in USD/CHF.
For derivative traders, this environment suggests it’s time to protect against or position for downside in the pair. We believe buying put options with a strike near 0.9000 could offer a cost-effective way to speculate on a move lower. This strategy provides defined risk if the dollar unexpectedly strengthens again.
Given the policy uncertainty, we’ve seen one-month implied volatility in USD/CHF climb from around 6% to 8.5% over the past quarter. This makes option-selling strategies, such as a bear call spread, more appealing for generating income. Selling a call spread above the recent highs around 0.9200 would allow traders to profit if the pair moves down or sideways.
