Dollar Faces Shutdown Pressure, But USD/CHF Bulls Eye 0.8070 Break
The USD/CHF is holding steady around 0.7960 in the European session on Monday, up for the second day. The dollar is under pressure...
Quick overview
- The USD/CHF is stable around 0.7960, supported by expectations of a Fed rate cut and ongoing political negotiations in Washington.
- Traders are concerned about a potential government shutdown, which could impact key economic reports and cost the US economy significantly.
- The Swiss National Bank has paused its easing cycle, maintaining rates at 0% amid subdued domestic inflation and global challenges.
- Technically, USD/CHF is in a rising channel, with strong support around 0.7958-0.7961, indicating potential for further upward movement.
The USD/CHF is holding steady around 0.7960 in the European session on Monday, up for the second day. The dollar is under pressure as Washington politics and dovish Fed expectations weigh.
Talks to avoid a government shutdown continue but funding for federal operations runs out on October 1. If no deal is reached non-essential government services will close. The Congressional Budget Office estimated the 2018-2019 shutdown cost the US economy $11 billion. Traders worry a prolonged standoff will delay key reports like nonfarm payrolls and fuel more caution.
Fed Rate Cut Bets Intensify Downside Pressure
At the same time traders have doubled down on Fed rate cut expectations after August inflation data met forecasts. The Personal Consumption Expenditures (PCE) Index rose 2.7% year on year, slightly above July’s 2.6%. Core PCE, which strips out food and energy, was unchanged at 2.9%.
Despite being in line with consensus the numbers strengthened rate cut expectations. According to the CME FedWatch Tool markets price an 88% chance of a rate cut in October and nearly 65% in December. This has capped dollar strength and provided underlying support for USD/CHF.
On the Swiss side the SNB recently paused its easing cycle, keeping rates at 0% after six consecutive cuts since March 2024. Economists expect the SNB to hold steady through 2025 as domestic inflation is subdued and global headwinds are strong. While the franc is stable the dollar is in control of the pair.
USD/CHF Technical Outlook: Bulls Defend the Channel
From a technical perspective USD/CHF is building momentum for another move higher. On the 2-hour chart the pair is inside a rising channel since mid-September. After failing to break above 0.8039 price has pulled back to the channel’s lower boundary.
The 50-EMA (0.7958) and 100-SMA (0.7961) are confluencing at this level creating a strong support zone. Candles with long lower wicks are showing buyers stepping in and a series of higher lows is confirming the short-term uptrend.Momentum indicators are stabilizing: the RSI is at 42 and coming up from oversold. A hammer or bullish engulfing candle here will add to the bullish case.
- Entry: Longs around 0.7960-0.7970
- Stop-loss: Below 0.7915, recent support
- Target 1: 0.8008 retest of the horizontal resistance
- Target 2: 0.8070 channel top
For traders this is a “decision zone”. As long as USD/CHF holds above the channel base the bulls are in control. A clean break below will shift momentum to the bears.
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