Key Points:
The USD/CHF pair is holding near a two-month high at 0.8660, with a recent peak of 0.8686 recorded during the mid-week session.
This upward momentum is partly driven by traders positioning for a potential rate cut from the Swiss National Bank (SNB) in December.
With inflationary pressures relatively low and economic activity showing signs of slowing, the SNB is widely expected to ease monetary policy further.
According to market consensus, this could push USD/CHF even higher, as rate differentials between the US and Switzerland widen further.
Picture: USD/CHF attempts recovery, but resistance at 0.8686 remains pivotal for further gains, as seen on the VT Markets app.
In this USD/CHF chart, the price closed at 0.86630, marking a slight recovery after touching an intraday low of 0.86533.
The market trend shows some consolidation after a downtrend, with the 15-minute moving averages (MA 5, 10, and 30) showing some tightening around current price levels.
The MACD histogram reveals a crossover that might suggest bullish momentum picking up, although the market is still hovering near short-term resistance at 0.8686.
However, the Swiss Franc (CHF) is also experiencing some support from its traditional role as a safe-haven currency amid escalating tensions in the Middle East.
On Wednesday, Israeli airstrikes targeted southern Beirut, and the US continued diplomatic efforts in the region.
As the situation intensifies, with Hezbollah deploying “precision missiles” and new drone technology, safe-haven flows into the CHF could temporarily limit any downside for the currency.
The US Dollar, meanwhile, has faced mild pressure as US Treasury yields dipped slightly. Despite this, the downside for the Greenback remains limited.
The latest inflation data in the US has kept concerns alive that the Federal Reserve may not take aggressive steps to cut interest rates in November.
See also: Dollar Climbs with U.S. Yields; Bitcoin Surges
The CME FedWatch Tool places the probability of a 25-basis-point rate cut at 88.9%, with no expectation for a larger 50-basis-point cut, suggesting the Fed’s cautious approach could support the dollar’s strength in the near term.
Traders will now turn their attention to the S&P Global Purchasing Managers Index (PMI), a key measure of US business activity in both manufacturing and services.
The PMI data, expected later today, could provide insight into whether economic activity is strong enough to warrant any shift in the Fed’s policy outlook.
If the PMI numbers show a slowing economy, it may pressure the dollar further, but stronger readings could reinforce the view that the Fed will hold off on deeper rate cuts.
While USD/CHF could continue to trade higher, the pair’s movement may be capped by safe-haven demand for the Swiss Franc and any signs of slowing US economic activity.
Traders should keep a close watch on both geopolitical developments and economic data releases for further direction.
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