On Monday (May 11) during the Asian session, the USD/CHF pair rebounded after fluctuating, rising as much as 0.43% to 0.7794, and is currently trading around 0.7780. The dashed hopes for a short-term ceasefire between the US and Iran, coupled with better-than-expected US non-farm payroll data in April, jointly drove safe-haven funds back to the US dollar, suppressing the Swiss franc's performance. Last Friday (May 8), the USD/CHF pair fell to 0.7761, a new low since March 10.

Breakdown of the three driving factors

I. Mutual rejection between the US and Iran dashes hopes for a ceasefire.

Last weekend, US President Trump stated on social media that Iran's response to the US peace proposal was "completely unacceptable." According to CNN, citing Iranian state media reports, the core demands of Iran's proposal include: US reparations for war losses; recognition of Iran's jurisdiction over the Strait of Hormuz; unfreezing of frozen Iranian assets; and lifting of sanctions. With the two sides' positions severely divergent, the possibility of reaching a permanent ceasefire in the short term has significantly decreased.

II. Rising Inflation and Interest Rate Hike Expectations

The stalemate between the US and Iran has pushed up global oil prices, coupled with the US non-farm payrolls report showing an increase of 115,000 jobs in April last Friday (far exceeding the expected 62,000), leading to a rise in market expectations for a Federal Reserve rate hike this year.

III. Market focus shifts to Trump's visit to China

Investors are turning their attention to Trump's high-level visit to China from May 13-15. IG market analysts point out that the market widely expects Trump to urge Beijing to use its influence over Iran to push for a comprehensive ceasefire and resolve the energy supply disruptions caused by the Hormuz blockade. The outcome of this meeting could be the next key event influencing the USD/CHF exchange rate.

Pay attention to signals from the China-US meeting

In summary, a breakthrough in US-Iran peace talks is unlikely in the short term. Coupled with relatively strong US economic data and rising expectations of interest rate hikes, the USD/CHF pair is expected to maintain a volatile trading pattern in the short term. Currently priced at 0.7788, it has not yet broken above the 20-day moving average (approximately 0.7825), indicating that bears are in control in the short term, and upward momentum is insufficient.

The 0.7824 level is where the MA20 is located, forming the first resistance. Further resistance is seen at the 50-day moving average of 0.7863. If 0.7863 is broken, the next target could be 0.7924 (MA200).


(USD/CHF daily chart, source: FX678)

However, the meeting between the leaders of China and the United States this week may release positive signals regarding the Iran issue. If China pledges to exert pressure on Iran, it could reignite hopes for a ceasefire, at which point a decrease in risk aversion would pose a downside risk to the USD/CHF exchange rate. Traders should closely monitor any statements made during the China-US meeting regarding the Strait of Hormuz and Iranian sanctions.

At 14:50 Beijing time on May 11, the USD/CHF exchange rate was 0.7780/81.