USD/CHF Price Forecast: Refreshes monthly high near 0.8040
- USD/CHF jumps to near 0.8040, the highest level seen in a month.
- Investors await Fed Powell’s speech to get fresh cues on the monetary policy outlook.
- The SNB is unlikely to push interest rates into negative territory.
The USD/CHF pair posts a fresh monthly high near 0.8040 during the European trading session on Thursday. The Swiss Franc pair trades firmly as the US Dollar (USD) trades close to its two-month high ahead of the speech from Federal Reserve’s (Fed) Chair Jerome Powell at 12:30 GMT.
During the European session, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades firmly near 99.00.
Investors will pay close attention to Fed Powell’s speech to get cues about how much the United States (US) central bank will cut interest rates further in the remaining year.
The Federal Open Market Committee (FOMC) minutes of the September policy meeting showed on Wednesday that officials that it would likely be appropriate to ease policy further over the remainder of 2025 as downside risks to employment to have increased.
Meanwhile, the Swiss Franc (CHF) trades broadly firm as investors expect that the Swiss National Bank (SNB) will not push interest rates into negative territory.
USD/CHF holds above the 20-day Exponential Moving Average (EMA), which trades around 0.7975, suggesting that the near-term trend is bullish.
However, the 14-day Relative Strength Index (RSI) wobbles inside the 40.00-60.00 range, suggesting a sharp volatility contraction.
A further recovery move by the pair above the August 1 high of 0.8170 will open the room for more upside towards the June 19 high of 0.8215, followed by the June 6 high of 0.8248.
In an alternate scenario, the pair could slide towards 0.7800, if it breaks below the September 17 low of 0.7829.
USD/CHF daily chart
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US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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