Swiss Franc gains as Fed rate pause bets weigh on US Dollar

• USD/CHF drops as the Fed's neutral tone drastically reduced expectations for an October interest rate hike.
• Markets now price in an 83.9% chance the Federal Reserve holds rates steady this month.
• Low Swiss borrowing costs keep the franc highly appealing for carry trade funding.

USD/CHF depreciates after opening at a bullish gap, remaining in positive territory and trading around 0.8240 during Asian hours on Monday. The currency pair lost ground as the US Dollar (USD) came under pressure from declining expectations of an October interest rate hike by the Federal Reserve.

Speaking at an International Monetary Fund event on Friday, Fed Chairman Kevin Warsh stated that he does not prejudge monetary policy decisions, leaving markets without a clear direction ahead of the central bank's upcoming October 27–28 meeting.

As a result of these neutral remarks, expectations for a rate increase dropped sharply. According to data from the CME FedWatch Tool, traders are now pricing in an 83.9% chance that the central bank will keep interest rates unchanged later this month, a substantial rise from the 49% probability recorded just a month ago.

Meanwhile, the Swiss National Bank (SNB) is widely anticipated to hold its policy rate at 0% through the end of the year, with policymakers dialing back threats of active currency intervention. Because Swiss borrowing costs have remained the lowest in the world for over a year, the franc continues to maintain its strong appeal as a preferred funding currency for carry trades.

USD/CHF downside momentum leaves UOB looking to 0.8200

Strategists at UOB Group note that the bearish bias in USD/CHF has intensified more quickly than they had anticipated. They recall that in their 1–3 week view last Friday (16 Oct, spot at 0.8280), they had highlighted that “downward momentum is building and if USD closes below 0.8245, it could decline toward 0.8225,” adding that “the odds of USD closing below 0.8245 will remain intact as long as it holds below the ‘strong resistance’ level, now at 0.8350.” Instead, they concede, “we did not expect downward momentum to strengthen so quickly, as USD plummeted to a low of 0.8215 and closed at 0.8239 (-0.34%).” Looking ahead, UOB now judges that “from here, USD could decline further to 0.8200,” while on the topside, “the ‘strong resistance’ is now at 0.8300.”

Technical Analysis:

In the daily chart, USD/CHF trades at 0.8240, holding in a neutral-to-capped stance as it sits above the 50-day Exponential Moving Average (EMA) but below the shorter nine-day EMA. This configuration suggests the recent pullback is consolidating rather than trending decisively, while the 14-day Relative Strength Index (RSI) around 47 hints at fading upside momentum after prior overbought readings, leaving the pair vulnerable to further mean reversion if buyers fail to reclaim nearby resistance.

On the topside, immediate resistance is located at the nine-day EMA around 0.8288, where a daily close higher would open the door to a stronger recovery phase. On the downside, initial support is provided by the 50-day EMA near 0.8213; a break beneath this floor would reinforce the nascent bearish bias and expose deeper losses toward prior swing lows not visible in the current indicator set.

(The technical analysis of this story was written with the help of an AI tool. Know more.)