USD/CHF Holds Firm as Iran Tensions Boost Safe-Haven Dollar

Traders' Opinions

Summary:

USD/CHF remained supported near 0.7880 as escalating US-Iran tensions, rising oil prices, and expectations of stronger US inflation data boosted demand for the US Dollar, while weak Swiss employment figures pressured the Franc.

BUY USDCHF

EXP

TRADING

0.78899

Entry Price

0.80200

0.78300

0.78551 -0.00076 -0.10%

0.0

Pips

Flat

0.78300

Exit Price

0.78899

Entry Price

0.80200

The Swiss Franc remained under moderate pressure against the US Dollar on Thursday, although the currency pair trimmed part of its earlier gains after USD/CHF briefly tested the key 0.7900 resistance zone during the Asian trading session. At the time of writing, the pair was hovering just below 0.7880, remaining positive for a third consecutive trading day as investors continued favoring the Greenback amid escalating geopolitical tensions in the Middle East and growing expectations of a more hawkish Federal Reserve.

The US Dollar’s resilience continues to be driven primarily by intensifying fears surrounding the conflict between the United States and Iran. Market sentiment deteriorated further after reports confirmed that the US military launched its second strike in three days on Iranian territory, while Tehran responded by reporting attacks targeting a US military base in the Gulf region. The renewed escalation has sharply reduced optimism surrounding a near-term ceasefire agreement and raised concerns that the Strait of Hormuz could remain disrupted for longer than previously expected.

In my view, financial markets are increasingly shifting from cautious optimism back toward defensive positioning as the risk of prolonged instability in the Gulf region grows. The Strait of Hormuz remains one of the world’s most strategically important energy corridors, and any sustained disruption to shipping activity through the waterway threatens to intensify global inflationary pressures through higher energy costs.

Adding another layer of complexity, Washington imposed fresh sanctions on Iran’s newly established Persian Gulf Strait Authority, the body responsible for coordinating navigation through Hormuz. The move has created operational uncertainty for commercial vessels because complying with Iranian reporting requirements could potentially violate US sanctions rules. This development has amplified fears of further logistical disruptions and contributed to the renewed safe-haven demand supporting the US Dollar.

Higher oil prices, which typically provide support for inflation-linked assets and currencies tied to commodity flows, have instead reinforced expectations that the Federal Reserve may need to maintain restrictive monetary policy for longer. Investors increasingly believe that prolonged geopolitical instability and elevated energy prices could complicate the Fed’s inflation battle at a time when US economic data remains relatively resilient.

Attention now turns to the release of the US Personal Consumption Expenditures (PCE) Price Index later in the day, widely regarded as the Federal Reserve’s preferred inflation gauge. Markets expect the report to show that underlying price pressures remained firm in April, strengthening the case for policymakers advocating a more hawkish stance.

Recent shifts in interest rate expectations have already boosted the Greenback considerably. Traders continue to increase bets that the Federal Reserve could deliver another interest rate hike in 2026 if inflation remains persistent. In my opinion, any upside surprise in the PCE figures could reinforce those expectations further and provide another leg higher for the US Dollar across the broader FX market.

Meanwhile, the Swiss Franc failed to find meaningful support from domestic fundamentals after Swiss employment data showed signs of softening economic momentum. According to Swiss Statistics, employment levels declined to 5.537 million during the first quarter from 5.544 million previously, highlighting a mild deterioration in labor market conditions.

Although the Swiss Franc traditionally benefits during periods of geopolitical uncertainty due to its safe-haven status, the current environment appears to favor the US Dollar more aggressively because of the widening divergence in monetary policy expectations between the Federal Reserve and the Swiss National Bank.

From a broader perspective, USD/CHF remains biased to the upside while geopolitical tensions persist and Fed tightening expectations remain elevated. Unless diplomatic progress between Washington and Tehran improves significantly, the path of least resistance for the pair may continue pointing higher in the near term, particularly if US inflation data reinforces the prospect of higher-for-longer US interest rates.

Technical Analysis

From a technical perspective, USD/CHF is attempting to extend its recovery after rebounding firmly from the 0.7760–0.7770 support zone, which has repeatedly acted as a critical floor throughout May. On the 4-hour chart, price action has shifted into a more constructive bullish structure, with buyers regaining control following a series of higher lows formed since the mid-May bottom near 0.7765. The pair is now trading around the 0.7890 region after breaking above the key 0.7855–0.7860 resistance band, which has now turned into immediate support.

The latest bullish leg suggests improving upside momentum, particularly after USD/CHF invalidated the recent short-term pullback structure and reclaimed territory above the 0.7880 handle. Price action also indicates the formation of a continuation pattern, with the market consolidating just beneath the psychologically important 0.7900 barrier. This level remains a pivotal near-term resistance, as it capped bullish attempts earlier in the session during the Asian trading hours.

A sustained breakout above 0.7900 would likely confirm renewed bullish continuation and expose the next major resistance zone around 0.7935–0.7940. Beyond that, bulls would likely target the broader supply region near 0.8020, which marks the upper resistance area visible on the chart and aligns with previous swing highs from early April. Such a move would reinforce the medium-term recovery structure and potentially trigger a stronger momentum-driven advance toward the 0.8050 psychological zone.

On the downside, initial support is now seen around the 0.7855 region, followed by stronger structural protection near 0.7815–0.7820. As long as price remains above these levels, the bullish recovery bias is likely to remain intact. However, a decisive break back below 0.7810 would weaken the current recovery narrative and expose the pair to renewed downside pressure toward the 0.7770 support area. A sustained move beneath that floor would invalidate the current bullish structure and shift focus back toward the yearly lows around 0.7720.

Momentum studies continue to favor buyers, although signs of short-term consolidation are beginning to emerge. The Relative Strength Index (RSI) on the 4-hour timeframe has likely climbed toward the 58–60 region, reflecting strengthening bullish momentum without yet entering overbought territory. This suggests there is still room for additional upside before momentum conditions become stretched.

Meanwhile, the Moving Average Convergence Divergence (MACD) remains above the zero line and continues to print positive histogram bars, confirming improving bullish momentum. However, the recent flattening in price action near 0.7900 suggests traders may wait for a stronger catalyst, such as US PCE inflation data or further geopolitical developments surrounding Iran, before committing to a decisive breakout.

Overall, the broader technical picture points toward cautious bullish continuation while USD/CHF holds above the 0.7850 support region. The pair appears to be building momentum for another test of the 0.7900–0.7940 resistance zone, though near-term consolidation cannot be ruled out after the sharp recovery from May lows.

TRADE RECOMMENDATION

BUY USD/CHF

ENTRY PRICE: 0.7890

STOP LOSS: 0.7830

TAKE PROFIT: 0.8020

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