USD/CHF: Dollar drifts lower as SNB rate cut bets build and FOMC looms

• USD/CHF trades weaker in a quiet session as Dollar sentiment deteriorates ahead of the FOMC and amid TWD-induced spillover pressure across Asian FX.
• US economic data remain firm, but Switzerland's soft inflation and the SNB's dovish bias are increasing market expectations for negative rates.
• Technicals point to continued downside for USD/CHF, with support seen below 0.9050 and trend signals leaning bearish.

USD/CHF is under pressure on Tuesday, with the pair slipping lower amid continued softness in the broader US Dollar. The pair is trading in the lower band of its recent range as global markets weigh the implications of Monday's extraordinary Taiwan Dollar move and its potential contagion across Asian currencies. Though the TWD pared some gains following central bank intervention, concerns about broader FX shifts continue to drive cautious positioning.

The US Dollar Index (DXY) is trading near 99.74, heading into the second straight day of losses. Markets are awaiting the outcome of the Federal Reserve's two-day policy meeting, which began today. No changes to rates are expected, and no updated forecasts will be released until the June 17-18 meeting. However, the tone from Fed Chair Jerome Powell will be closely scrutinized as markets look for guidance on the timing and magnitude of potential rate cuts. Recent data--particularly April's ISM Services PMI at 51.6 and solid Nonfarm Payrolls at 177,000--suggest that the Fed can afford to wait, although the Q2 GDP outlook remains mixed, with models showing growth between 1.1% and 2.3%.

In Switzerland, the franc continues to attract safe-haven demand, but its strong performance and a flat inflation print in April are complicating the Swiss National Bank's stance. Swiss CPI came in unchanged year-over-year, with core inflation falling to 0.6% from 0.9%. This has fueled speculation that the SNB may deliver a further rate cut at its June 19 meeting, potentially pushing policy back into negative territory. Market-implied rates now reflect around 40 basis points of easing over the next quarter. The SNB remains concerned about deflation risks and has kept FX intervention on the table as a policy option.

Geopolitical tensions in Europe and the Middle East are also reinforcing demand for safe havens. Germany's incoming Chancellor Friedrich Merz failed to secure a parliamentary majority in the first round of voting, and the ongoing conflicts in Ukraine and Gaza continue to elevate risk-off flows.

Technical Analysis

Technically, USD/CHF remains under selling pressure. Although a full technical breakdown wasn't provided in this input, prevailing trends show the pair is biased to the downside, with the 0.9100-0.9050 zone acting as a key support band. If this range is broken, the next potential level to watch is 0.9000. On the upside, resistance is expected near 0.9150 and 0.9185, aligned with recent consolidation peaks. Momentum indicators are broadly bearish, with trend signals suggesting further softness unless the FOMC triggers a shift in Dollar sentiment.

With SNB rate cut bets rising and the Fed unlikely to deliver a hawkish surprise, the path of least resistance for USD/CHF appears lower in the near term.

Daily Chart