The 10% drop in USDCHF since the start of the year has been driven by strong demand for safe-haven assets amid rising political and geopolitical risks. This is slowing inflation in Switzerland and forcing the SNB to cut rates. Let’s discuss it and make a trading plan.
The article covers the following subjects:
Major Takeaways
- The Swiss National Bank is ready to return to negative interest rates.
- Speculators have pushed net long CHF positions to four-year highs.
- Trade policy and geopolitics are boosting demand for the franc.
- A drop below 0.8135 and 0.811 could be a chance to add to USDCHF short positions.
Weekly Fundamental Forecast for Franc
The Swiss National Bank is starting to look like Don Quixote. It is capable of surprises, but unlikely to win a fight against the windmills of global trade and geopolitics. Ahead of the SNB’s June meeting, most Bloomberg analysts believed the expected rate cut to zero would mark the end of the easing cycle. However, the central bank left the door open for more cuts, giving USDCHF a boost. Nevertheless, the bulls didn’t celebrate for long.
Only 6 out of 22 banks predicted further monetary easing in September. The rest expected the June move to be the last. And for good reason: if CPI weakness stemmed from domestic economic issues, returning to negative rates might be justified. But the real drivers are low energy prices and a strong franc—factors that should, in theory, hold the SNB back.
Updated forecasts now indicate that inflation is expected to slow to 0.2% in 2025 and 0.5% in 2026. At the same time, the SNB still expects GDP to grow by 1–1.5%, in line with the government’s latest estimate of 1.3%.
Swiss GDP Forecasts
Source: Bloomberg.
Martin Schlegel stated at a press conference that the SNB is working to counter falling inflation pressure and will adjust policy as needed. The bank is aware of the risks of negative rates, but it will choose the lesser of two evils if necessary.
The SNB has already gone as far as it can in trying to weaken the franc. According to UBS, currency intervention is unlikely, as U.S. policy has effectively tied Switzerland’s hands. The key rate is already low, and safe-haven demand remains high during market turmoil. This combination is encouraging speculators to bet that the SNB will eventually stop resisting, driving long CHF positions to their highest levels in four years.
Speculative Positioning in Franc
Source: Bloomberg.
Goldman Sachs believes global factors will matter more to USDCHF than domestic ones. The bank compares the franc to gold during crises and sees it holding strong even if the SNB returns to negative rates. It forecasts the pair falling to 0.76. Morgan Stanley and JP Morgan are also bearish on USDCHF.
Weekly Trading Plan for USDCHF
Fighting headwinds and tilting at windmills rarely ends well. The SNB’s dovish tone has allowed traders to re-enter USDCHF shorts from the previously identified 0.819 level. A break below support at 0.8135 and 0.811 would open the way for adding to short positions.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of USDCHF in real time mode
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance broker. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2014/65/EU.
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