Strong demand for safe-haven assets, Switzerland’s solid foreign trade performance, and the Swiss National Bank’s reluctance to cut interest rates have dragged the EURCHF pair down to an 11-month low. However, bears may not be as strong as they seem. Let’s discuss this topic and make a trading plan.
The article covers the following subjects:
Major Takeaways
- Franc climbs amid French political turmoil.
- Switzerland recorded a stronger-than-expected trade surplus.
- The Swiss National Bank may resume currency interventions.
- If the EURCHF pair breaks through the 0.9245 level, one may open long trades.
Weekly Fundamental Forecast for Franc
The Swiss franc has been the only G10 currency able to hold its ground against the US dollar in October. It reached a record high against the Canadian dollar and an 11-month high against the euro. The rise in demand for safe-haven assets, partly driven by the political crisis in France, together with strong Swiss economic data and the Swiss National Bank’s limited room to ease policy, has given EURCHF bears control of the market.
One would think that the government of Sébastien Lecornu surviving two no-confidence votes would have put an end to France’s political drama. The yield spread between Swiss and German bonds is not widening, and the CAC 40 index has reached a new record high. Yet the political uncertainty is far from over. The upcoming battle over the national budget still looms, a factor supporting EURCHF bears. From a technical perspective, however, the pair looks oversold, increasing the risk of a short-term rebound.
EURCHF Trends and Risk Reversals
Source: Bloomberg.
The debate over the French budget may prove less contentious than anticipated. Sébastien Lecarno’s initial proposal for a 4.7% GDP deficit is unlikely to gain parliamentary approval. However, the Prime Minister could still negotiate a figure below 5%.
Given the 39% tariffs imposed by the US, the rebound in Swiss exports and foreign trade in September came as a surprise. Switzerland’s trade surplus with the US widened from 2.06 billion francs in August to 3.3 billion in September, suggesting that American buyers are paying higher prices instead of cutting back on imports.
Swiss External Trade Performance
Source: Bloomberg.
Still, this trend cannot last forever. The Swiss government recognizes the risks and has trimmed its 2026 growth forecast. Meanwhile, the Eurozone economy is expected to gain momentum next year, supported by fiscal stimulus in Germany and higher EU defense spending.
Switzerland’s Economic Trends
Source: Bloomberg.
The Swiss National Bank’s hesitance to return to negative interest rates is a key factor boosting the franc’s value. While rates remain at zero, Switzerland contrasts with other major economies like the US, which are implementing monetary easing. This divergence contributes to the Swiss franc’s appreciation. However, a stronger currency poses a renewed risk of deflation, a challenge the SNB has faced historically.
The central bank also has the option of currency interventions. While this may risk being labeled a currency manipulator by the US, it is often prudent to choose the lesser of two evils in challenging circumstances.
Weekly EURCHF Trading Plan
If the SNB’s latest meeting minutes refer to intervention in the Forex market, EURCHF bears will have to retreat. Their positions are not as stable as they seem. Once the pair exceeds 0.9245, one may consider long trades.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of EURCHF in real time mode
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