Swiss Franc remains near 16-month lows as rate hike odds lift US Dollar

USD/CHF continues its winning streak for the sixth successive trading day, trading near its 16-month high of 0.8358 during Asian hours on Wednesday. The currency pair appreciates as the US Dollar (USD) gains ground, backed by firming market expectations for additional Federal Reserve (Fed) interest rate hikes.

CME FedWatch Tool data indicates that traders are currently pricing in nearly a 68% probability of a rate hike in October and a 95% likelihood of a 25-basis-point increase in December. Market focus now shifts to Friday's upcoming US Nonfarm Payrolls report, with economists anticipating an addition of 90,000 jobs in September and the Unemployment Rate holding steady at 4.1%.

Meanwhile, Switzerland's economic outlook showed notable strength as the Swiss KOF Leading Indicator improved to 109.1 in September, its highest level in six years. This beats expectations of a drop to 105.8 and follows an upwardly revised August reading of 107.5. Looking ahead, market participants will monitor the release of the Swiss ZEW Expectations survey for September alongside the Swiss National Bank's Third Quarter Quarterly Bulletin for further directional cues.

Analysts at Rabobank highlight that the Swiss National Bank has maintained its cautious stance, noting that “the SNB released its decision to hold the overnight policy rate at 0.0% at the September 24 meeting.” This unchanged setting comes against a backdrop of largely steady CHF positioning, even as market pricing on the OIS curve points to expectations for more than two SNB rate hikes by mid‑next year, offering some forward‑looking support for the Franc despite the current net short stance.

Technical Analysis:

In the daily chart, USD/CHF trades at 0.8350, extending its recovery above both the nine- and 50-period Exponential Moving Averages (EMAs), which reinforces a near-term bullish bias. The alignment of the shorter EMA above the longer one hints at strengthening upside momentum, while the 14-day Relative Strength Index (RSI) at 74.21 pushes into overbought territory, suggesting the rally could be stretched even as directional pressure remains positive and supported by an elevated FXS Fed Sentiment Index near 143.70.

On the downside, initial support is seen at the nine-period EMA around 0.8284, with a deeper corrective floor emerging at the 50-period EMA near 0.8152 if profit-taking accelerates. On the topside, while no precise price-based resistance has formed yet, the overbought RSI and high Fed Sentiment readings warn that upside may become increasingly vulnerable to a pullback as buyers test higher ground above 0.8345.