USD/CHF Price Forecast: Regains ground below 0.7900
- USD/CHF rises to near 0.7900, while its outlook remains bearish amid Fed dovish expectations.
- The Fed is expected to cut borrowing rates by at least 50 bps in 2026.
- The Swiss Franc pair stays below the 20-day EMA.
The USD/CHF pair trades 0.18% higher to near 0.7915 during the European trading session on Monday. The Swiss Franc pair rises after gaining ground near 0.7860, the lowest low seen in over three months. The pair bounces back even as the Federal Reserve (Fed) is expected to cut interest rates by at least 50 basis points (bps) in 2026, suggesting that the outlook of the pair is still downbeat.
The CME FedWatch tool shows that the odds of the Fed reducing interest rates at least 50 bps in 2026 are 73.3%. The expectations for the size of interest rate reduction are higher than what officials projected in the policy meeting announced on December 10. Fed’s Economic Projections report showed that policymakers collectively see the Federal Funds Rate heading to 3.4% by the end of 2026.
Fed dovish speculation is intensified by hopes that the successor of Chairman Jerome Powell will advocate aggressive monetary easing in 2026.
Last week, United States (US) President Donald Trump stated last week that he wants the “new Fed Chairman to lower interest rates even if the market is doing well".
Meanwhile, the Swiss Franc (CHF) trades marginally lower at the start of the thin trading volume week.
USD/CHF technical analysis
USD/CHF trades higher near 0.7915, but is close to its three-month low of 0.7830. The 20-day Exponential Moving Average (EMA) at 0.7966 remains lower, capping rebounds and keeping pressure on the pair.
The 14-day Relative Strength Index (RSI) at 31 (near oversold) confirms weak momentum.
Bearish momentum would persist while price remains beneath the 20-day EMA, and a daily close below the September 17 low of 0.7830 would elevate downside pressure.
(The technical analysis of this story was written with the help of an AI tool.)
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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