UBS analysts expect USD/CHF to trade in 0.80-0.85 range

UBS has shared its perspective on the current state of the US dollar, citing US policy uncertainty and questions surrounding the Federal Reserve’s independence as factors contributing to the currency’s recent decline.

Concerns have been raised by President Trump’s public criticism and legal inquiries into the possibility of removing Federal Reserve Chair Jerome Powell from his position. Although Powell’s term is set to last until May 2026, the discussion about the Fed’s independence has introduced a new element of uncertainty.

The Swiss National Bank (SNB) is anticipated to curb any sharp, short-term appreciation of the Swiss franc against the Euro, with expectations for the EUR/CHF to remain broadly stable. The USD/CHF exchange rate is projected to reflect movements in the EUR/USD pair.

UBS analysts believe that potential upcoming trade deals by the US administration could alleviate some of the downward pressure on the US dollar, potentially pushing the USD/CHF towards the higher end of the projected 0.80-0.85 range.

However, UBS analysts also note that significant appreciation above 0.85 is less likely due to reputational damage to the US and its currency, as well as the looming replacement of Fed Chair Powell. They expect global investors to use any rebounds in the US dollar as opportunities to decrease their USD holdings or to increase their hedge ratios, which would limit the potential for a more substantial USD rally.

In the event of a sharper downturn in the US economy, which could lead the Fed to cut rates more aggressively and narrow the yield difference with the SNB, there could be stronger flows into the Swiss franc. This scenario could result in the USD/CHF trading below 0.80.

UBS outlines the medium-term prospect of the USD/CHF likely trending lower rather than higher, with technical support identified at 0.80 and new resistance at the recent support level of 0.84.

The investment considerations put forth by UBS suggest a cautious outlook for the US dollar, with specific boundaries and risks outlined for the USD/CHF trading range. The firm also points out that meaningful trade deals struck by the US administration in the near future could reduce policy uncertainty and impact the currency’s performance.

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