The Swiss Franc climbs higher amid risk aversion, while US Dollar long positions face pressure. What could happen next?

Market Fundamentals Overview

US Dollar (USD):

The US Dollar has experienced notable weakness at the start of this week, largely due to President Trump’s recent actions concerning Greenland. The President has threatened to introduce a 10% tariff on imports from the UK, France, Germany, and several other European nations beginning February 1, unless the US is allowed to purchase Greenland. Should no agreement be reached, these tariffs are set to increase to 25% from June 1.

This renewed pressure on the greenback is primarily attributed to ongoing global moves away from the dollar, driven by unpredictable and forceful US policy decisions. The current downturn may also be influenced by traders adjusting their positions after a period of dollar strength.

Recent gains in the USD, fueled by slightly more hawkish expectations, have been reversed by this latest escalation. Should tensions ease, the dollar could rebound, especially if upcoming economic indicators show improvement in the weeks ahead.

President Trump is scheduled to address the World Economic Forum in Davos tomorrow, where discussions with European leaders about Greenland are anticipated. Be alert for any statements or social media updates from Trump, as these could signal either a reduction or intensification of the current situation.

Swiss Franc (CHF):

The Swiss Franc continues to strengthen, benefiting from increased risk aversion in the markets. On the policy front, the Swiss National Bank (SNB) maintained its stance at the latest meeting and expressed a slightly more optimistic outlook, partly due to the lower US tariff rate. SNB officials have reiterated that the threshold for implementing negative rates remains high, meaning the franc’s movements are largely dictated by shifts in market risk sentiment.

USDCHF Technical Analysis

Daily Chart

Examining the daily timeframe, USDCHF has wiped out all gains made in January within just a few days, reflecting the recent surge in risk-off sentiment. Should the decline continue, significant buying interest is likely to emerge near the crucial support area around 0.7870. Conversely, a break below this level could encourage sellers to push for new cycle lows.

4-Hour Chart

On the 4-hour timeframe, the pair has reached a notable swing point close to the 0.7900 mark. This area may attract initial buyers looking to enter with controlled risk below this level, aiming for a move higher. Sellers, meanwhile, will be watching for a breakdown to extend losses toward the 0.7870 support zone.

1-Hour Chart

Looking at the 1-hour chart, USDCHF has already touched the lower end of today’s average daily range. This often leads to a period of consolidation or a short-term rebound. A descending trendline is currently guiding the bearish momentum. Should a pullback occur, sellers may use the trendline as a reference point for renewed downside attempts, while buyers will be looking for a breakout above it to target new highs.

Key Events Ahead

• Today: US ADP employment data and a possible Supreme Court ruling on Trump’s tariffs.
• Tomorrow: President Trump’s address at the World Economic Forum in Davos.
• Thursday: Release of the latest US Jobless Claims figures.
• Friday: Publication of US Flash PMI data.

Stay alert for breaking news and updates from Trump, especially regarding Greenland, as these developments remain central to market sentiment.