CAD/CHF Drops Below 0.6250: Will the Swiss Franc Continue to Dominate the CAD Ahead of Economic Data?

Forex

Summary:

On February 25, 2025, the CAD/CHF market experienced significant volatility, falling to 0.6249, down 0.5% from a high of 0.6300 earlier in the week. Key factors included the neutral policy of the Swiss National Bank (SNB)..

SELL USDCHF

EXP

EXPIRED

0.62300

Entry Price

0.62000

0.62900

0.79552 +0.00175 +0.22%

Pips

EXPIRED

0.62000

0.89442

Exit Price

0.62300

Entry Price

0.62900

Overview

On February 25, 2025, the CAD/CHF price traded around 0.6249, falling sharply due to pressure from monetary policy and weak Canadian economic data. The Bank of Canada (BoC) maintained interest rates at 4.00%, but GDP in the fourth quarter of 2024 increased by only 0.6%, lower than the forecast of 0.8%, while inflation fell to 2.8%, raising concerns that the BoC may ease policy early. The Canadian manufacturing PMI in February 2025 fell to 48.0, below the threshold of 50, indicating that the industry continued to shrink, putting downward pressure on the CAD.

In contrast, the Swiss National Bank (SNB) kept its interest rate at 1.25%, neutral, but the CHF was reinforced as a safe asset by stable economic data. The Swiss manufacturing PMI in February 2025 reached 51.5, higher than the forecast of 50.8, and exports increased by 4.0% thanks to demand from the EU, supporting the CHF. Geopolitical tensions in Europe, especially the conflict in Ukraine, increased the CHF's safe-haven role, while WTI oil prices fell slightly to $78.00/barrel, negatively affecting the CAD, which depends on energy exports.

The interest rate differential between CAD and CHF, along with market sentiment, pushed CAD/CHF lower, with expectations that the SNB could keep its policy neutral for at least the next 3 months.

Market psychology

Market sentiment on February 25, 2025 was skewed toward anxiety, with the VIX at 22 and the Fear Greed Index falling to 27, reflecting concerns about the global economy. Investors turned to CHF as a safe-haven asset on the back of solid Swiss economic data, while CAD was sold off on the weak Canadian economic outlook. CME Group data showed that CAD/CHF futures short volume rose 22% for the week, with major funds such as UBS reducing their CAD positions and increasing CHF, reinforcing the downward pressure on the pair.

CHF trading volumes in the forex market increased by 18%, especially in the CAD/CHF pair, with volumes reaching $90 billion/day, a two-month high. In contrast, the CAD lost strength, with the CAD's relative strength index against the G10 currency basket falling to its lowest level since November 2024. A report from Credit Suisse on February 24, 2025 predicted that CAD/CHF could fall another 1-2% if the BoC signals easing, but if the SNB raises interest rates, the CHF could recover slightly, reducing the downward pressure.

Technical analysis

CAD/CHF Drops Below 0.6250: Will the Swiss Franc Continue to Dominate CAD Ahead of Economic Data?_1

On the CAD/CHF chart on 25/02/2025, the price dropped sharply to 0.6249, below the MA50 (0.6280) and MA200 (0.6320). Important support is at 0.6200 (January 2025 low) and resistance is at 0.6280 (MA50). RSI is at 32, in the oversold zone (below 30), but has not shown any signs of recovery, indicating that the bearish pressure has not yet exhausted itself. Bollinger Bands are expanding with the price touching the lower band at 0.6230, signaling high volatility. MACD is below zero, with the histogram at -0.0010, confirming the downtrend, but momentum may slow if the price meets strong support.

If price breaks 0.6200, next target is 0.6150; if it breaks 0.6280, test 0.6320 is possible. The current downtrend is supported by increasing trading volume and bearish crossover of moving averages.

Trading Recommendations

Entry: 0.6230

TP: 0.6200

SL: 0.6290

Note risks from SNB decision 27/02/2025 and Canadian employment data, manage risk at 1-2% of account to deal with volatility from energy market or geopolitics.

CAD/CHF on 25/02/2025 fell sharply due to weak Canadian economy and CHF increasing its safe-haven role. Technical trends reinforce the bearish scenario, but investors need to be cautious with the upcoming SNB decision and economic data, and manage risks closely in volatile markets.

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