The USD/CHF exchange rate has stayed in a tight range for the past few months. Investors have been watching the trade relations between the United States and Switzerland. The pair has been moving between support at 0.7865 and resistance at 0.8152.
The tension between the two countries eased after a deal announced earlier this month. The agreement cut US tariffs on most Swiss goods from 39% to 15%. In return, Swiss and Liechtenstein companies will invest $200 billion in the US over the next five years. $67 billion of this will go in the first year.
The trade war had some impact on Switzerland’s economy. A report showed the economy shrank by 0.5% in Q3 after a small 0.2% growth in Q2. This contraction was slightly better than expected and was the first since the pandemic. Year-on-year growth slowed to 0.8%, down from 1.5% in the second quarter. Weak exports to the US were the main reason.
Swiss inflation remains very low. October’s inflation fell to 0.1% compared to last year and dropped 0.25% from the previous month. This signals that Switzerland may now be in a deflationary period.
As a result, the Swiss National Bank may continue to cut interest rates, possibly moving them below zero. The bank’s head, Martin Schlegel, said negative rates could go lower if needed. Analysts note that the SNB is prepared to let the franc strengthen while using targeted interventions to keep markets stable.
Technically, USD/CHF fell from a high of 0.9200 in February to a low of 0.7865 in September. It has stayed in a narrow range while traders wait for the Federal Reserve and SNB interest rate decisions. The pair is slightly above its 50-day average and shows a bearish flag pattern, which often points to further declines.
If USD/CHF drops below 0.7865, it could fall further toward 0.7800. For now, it will likely stay in its current range until the next big market catalyst.
