The recent upside momentum has stalled a little but the pair still clocked in three straight weekly gains coming into trading this week. The good news for buyers is that price is consolidating just above the 0.9000 threshold now. It's not entirely technically significant but is a good psychological checkpoint at least.
Among all the major pairs, USD/CHF has the potential to be one of the more prominent divergent trades currently. The SNB has already kick started their rate cut cycle with a surprise move two weeks' back. Meanwhile, the Fed is arguably still somewhat caught in a 50-50 mode for a move in June now.
If the jobs data this week remains strong and inflation numbers remain stubborn next week, that could cause some uneasiness in the existing market pricing. Coming into April, the odds of a June rate cut is ~72% priced in. The gap shows that traders are not overwhelmingly convinced that it is a done deal yet. They will have to be guided by the data, and arguably so will the Fed.
That's one way to look at how USD/CHF might play out in the weeks ahead. And if so, the pair should be poised to retest the October high of 0.9245.
But when you look at things the other way, whereby the data is weak and the disinflation trend persists, that should limit USD/CHF upside in the short-term.
In the bigger picture though, traders are already pricing in 76 bps worth of rate cuts by the Fed for this year. So, unless they are convinced that the Fed will cut four times, there's still a limit to any dollar downside in that regard. That especially when paired against the franc, with the SNB in a stronger position to cut at each remaining meeting this year.
