USD/CHF Eyes Deeper Unwind as Key US Data Looms

Published 03/04/2025, 04:57 pm
Updated 03/04/2025, 06:56 pm
  • USD/CHF breaks below 0.8760, now seen as resistance
  • Correlation with U.S. yield spreads near perfect in March quarter
  • RSI and MACD favour further downside
  • Key U.S. payrolls, ISM data could drive the next move

The Swiss franc is behaving more like a play on interest rate differentials than a safe haven in 2025, meaning the steep decline in U.S. Treasury yields in response to higher U.S. tariff rates announced by Donald Trump as part of “Liberation Day” poses an immediate downside threat to USD/CHF, especially with technicals moving in favour of the bears.

USD/CHF Remains Rates Play

The chart below highlights just how important rate differentials between the United States and Switzerland were for USD/CHF movements in the first quarter of 2025, with correlation coefficients between 2-year, 5-year, and 10-year yield spreads ranging from 0.92 to 0.94. That indicates a near-perfect relationship between the Swissie and spreads over the first three months of the year, largely reflecting shifts in U.S. rates given the 0.87 correlation it had with 2025 Fed rate cut pricing over the same period.USD/CHF-Daily Chart

Source: TradingView

The euro was also predominantly a play on rate differentials in Q1, explaining the strong negative correlation between EUR/USD and USD/CHF over the same period. In contrast, the inverse relationship between U.S. equity and bond market volatility gauges was nowhere near as strong, reinforcing the view that the Swissie should be seen more as a rate differentials play.

That means traders should focus not only on potential trade negotiations but also on key upcoming U.S. economic data, including the ISM services PMI on Thursday and March nonfarm payrolls report on Friday. Any signs of weakness in those reports, especially the latter, could accelerate the latest downside move in USD/CHF.Economic Calendar for April 3

Source: TradingView

USD/CHF Bears Eye Downside

USD/CHF has just broken to fresh 2025 lows at the time of writing, taking out downside support at 0.8760. That level may now act as resistance, creating a setup where bears could initiate shorts with a stop above targeting a retest of 0.8711 or major support at 0.8617.

The gradual uptrend in RSI (14) has been broken, pulling it further away from neutral territory. MACD is also negative and threatening to cross over from above, providing a combined signal that favours downside over upside.USD/CHF-Daily Chart

Source: TradingView

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