USD/CHF Pair Hits New Highs Amid Trade War Escalation and US Economic Data

Economic

Summary:

The USD/CHF pair surged to near 0.9165 during early European trading hours on Monday, driven by the strengthening of the US Dollar as President Donald Trump’s aggressive tariff policies ignited fears of a trade war.

BUY USDCHF

Close Time

CLOSED

0.91398

Entry Price

0.93000

0.90000

0.79582 +0.00060 +0.08%

139.8

Pips

Loss

0.90000

0.89992

Exit Price

0.91398

Entry Price

0.93000

The US Dollar (USD) has seen an impressive rally against the Swiss Franc (CHF), extending gains to near 0.9165 during the early European trading session on Monday. The surge marks a continuation of the Greenback’s momentum, which has been fueled by recent developments surrounding President Donald Trump’s trade policies. This marks the latest chapter in a growing narrative of trade tensions, which are having significant repercussions not only for international markets but also for key currency pairs such as USD/CHF.

The rally in the USD was ignited by President Trump’s announcement over the weekend that he would impose sweeping tariffs on goods imported from Mexico, Canada, and China. On Saturday, Trump revealed a 25% tariff on imports from Mexico and Canada, coupled with a fresh 10% levy on Chinese products. These moves are seen as part of Trump’s ongoing strategy to reshape global trade dynamics in favor of US interests, but they have also sparked fears of a trade war that could potentially destabilize international markets.

The USD’s jump, up to 0.60% against the CHF, pushed the pair to its highest point since May 2024. The imposition of these tariffs is expected to significantly disrupt supply chains, raise costs for US businesses, and potentially lead to retaliatory measures by the affected countries. As a result, investors have responded by increasing their positions in the USD, which is viewed as a safe-haven asset in times of geopolitical uncertainty.

However, as the trade situation unfolds, there are indications that China, in particular, is seeking to avoid further escalation. According to a report from the Wall Street Journal, the Chinese government is preparing an opening bid in a bid to head off further tariff increases and potential technology restrictions by the Trump administration. This suggests that China may be open to discussions in an effort to de-escalate the growing trade tensions. This development is likely to be closely monitored by investors, as any signs of negotiation or renewed diplomatic efforts could help to stabilize the market and reduce the USD’s strength.

Adding fuel to the USD’s ascent, economic data released by the US Bureau of Economic Analysis (BEA) on Friday painted a picture of persistent inflationary pressures. The Personal Consumption Expenditures (PCE) Price Index, a key gauge of inflation, rose by 2.6% year-over-year (YoY) in December, up from 2.4% in November. This reading was in line with market expectations, suggesting that inflation remains within the US Federal Reserve's target range.

Meanwhile, the core PCE Price Index, which excludes the more volatile categories of food and energy, climbed by 2.8% YoY in December, matching November’s reading and expectations. This consistent inflation data provides a strong argument against any immediate rate cuts by the Federal Reserve, especially in light of the ongoing tariff increases. Inflation is often a key consideration in the Fed’s decision-making process, and with the PCE index still above the central bank’s target, it seems likely that the Fed will hold off on loosening monetary policy any time soon.

As a result, market expectations for Fed rate cuts have significantly decreased. The latest market pricing suggests that there is a 54% chance of two rate cuts this year, down from prior expectations. A 44% probability remains for just one rate cut. The reduced likelihood of monetary easing has further supported the USD, reinforcing the bullish sentiment in the currency pair.

On the Swiss side, economic data was slightly more positive, but not enough to reverse the broader trend in favor of the USD. Switzerland’s Real Retail Sales saw an impressive 2.6% YoY increase in December, up from a revised 1.4% in November. This figure came in far above the expected 0.6%, providing some optimism for the Swiss economy. The retail sales figure suggests that consumer spending in Switzerland remains robust, which could support the Swiss Franc in the face of rising trade uncertainties.

However, despite the stronger retail data, the broader trend still favors the USD. The Swiss Franc typically benefits from its status as a safe-haven currency, but the USD has emerged as the preferred safe-haven in this climate of heightened trade tensions and economic uncertainty. As such, the Franc has struggled to maintain its strength against the Greenback, especially with concerns about the global economic outlook taking center stage.

Technical Analysis

From a technical perspective, the USD/CHF pair has been following a strong bullish trend, with the price recently hitting a key target at 0.9150. The pair is currently trading within a bullish channel, and the momentum suggests that further gains are likely in the near term. The next key resistance level is seen at 0.9300, which traders will be closely watching as the price looks set to test this level.

The 50-period Exponential Moving Average (EMA50) continues to support the bullish trend from below, indicating that the pair is likely to remain in an uptrend unless there is a significant shift in market sentiment. Traders should watch for a potential break of the 0.9120 support level, which could signal a reversal in the trend and open the door for further downside moves.

The expected trading range for today is between 0.9120 support and 0.9245 resistance, with the overall outlook remaining bullish for the pair.

TRADE RECOMMENDATION

BUY USDCHF

ENTRY PRICE: 0.9140

STOP LOSS: 0.9000

TAKE PROFIT: 0.9300

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USD/CHF Pair Hits New Highs Amid Trade War Escalation and US Economic Data

Technical Analysis

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