Swiss Franc weakens as increased risk aversion boosts safe-haven US Dollar

• USD/CHF gains as escalating Middle East conflict fears drive global safe-haven demand toward USD.
• Fed rate uncertainty emerges as rising oil prices and yields fuel inflation fears.
• Cooling Swiss inflation to 0.4% leaves the Swiss National Bank likely keeping rates flat at 0%.

USD/CHF extends its gains for the second successive day, trading around 0.8130 during the Asian hours on Friday. The currency pair appreciates as the US Dollar (USD) gains strength, driven by renewed safe-haven demand amid escalating Middle East tensions.

Market stability has been rattled by growing skepticism regarding the reopening of the strategic Strait of Hormuz. Adding to the geopolitical strain, The Guardian reported that Saudi Arabia intends to extend military operations against Iran-aligned Houthis, in support of the internationally recognized Yemeni government, following attacks on its southern Najran province. Meanwhile, Iran's parliament is evaluating a draft proposal to prohibit US and Israeli vessels, impose a 20% cargo penalty on hostile nations, and restrict the corridor until the US blockade is lifted.

Meanwhile, rising US Treasury yields and recovering crude oil prices have reignited fears that the Federal Reserve could implement another interest rate hike next month. Despite these inflationary signals, the CME FedWatch Tool currently reflects a 54.5% probability of a 25-basis-point rate increase in September, down from 63.4% last week. Investors and traders are now turning their attention to the upcoming July Nonfarm Payrolls (NFP) report to assess labor market health and gain clearer insights into the Fed’s future monetary policy trajectory.

On the Swiss side, economic indicators present a mixed picture. Switzerland’s non-seasonally adjusted unemployment rate ticked up to 3.0% in July from 2.9% in June, while youth unemployment (ages 15–24) edged up slightly to 2.8%. Markets will closely watch the release of the July Foreign Currency Reserves and Q3 SECO Consumer Climate data later in the day.

Franc under pressure as muted Swiss inflation keeps SNB on hold

Brown Brothers Harriman highlights that "Swiss July CPI stays muted," with headline inflation running at just 0.4% year-on-year and core at 0.3% for a fourth consecutive month. With the SNB projecting only modest CPI averages and maintaining its policy rate at 0.00%, strategist Elias Haddad argues this subdued inflation backdrop is likely to keep the Swiss Franc on the defensive, noting it is currently the weakest G10 currency this quarter.

Technical Analysis: USD/CHF holds above nine-day EMA

In the daily chart, USD/CHF is maintaining a modest bullish near-term bias as it holds above both the nine-day and 50-day Exponential Moving Averages (EMAs). The configuration of short- and medium-term EMAs below price suggests a constructive backdrop, while the 14-day Relative Strength Index (RSI) near 54 reinforces a neutral-to-positive momentum tone rather than overbought conditions.

On the topside, immediate resistance appears at the horizontal barrier around the 13-month high of 0.8207. On the downside, initial support is offered by the nine-day EMA at 0.8111, followed by the 50-day EMA at 0.8056, with deeper structural floors seen at nearly a five-month low of 0.7762.

(The technical analysis of this story was written with the help of an AI tool. Know more.)