USD/CHF rebounds on hawkish Fed stance and upbeat US economic data

• USD/CHF gains as US Retail Sales support a hawkish Fed stance.
• Expectations that the Fed will cut rates in September decline, central bank divergence supports USD/CHF strength.
• USD/CHF eyes further gains as bearish momentum fades above 0.8000

The US Dollar (USD) is firming against the Swiss Franc (CHF) as upbeat US economic data and hawkish Federal Reserve (Fed) comments support demand for US yields.

Retail Sales data on Thursday reflected an increase in consumer spending for June, coming in at 0.6%, above the expected 0.1% rise.

The upside surprise in spending, despite tariff uncertainty and high interest rates, has provided a glimmer of hope for the US economy.

As the Federal Reserve continues to express concern over the potential impact of tariffs on inflation, this data, combined with a strong labour market, reflects a resilient economy.

However, as the August tariff deadline looms, downside risks remain. Higher tariffs on imports to the US remain a major concern for investors and policymakers alike. An increase in these levies is expected to increase costs for producers, raising the potential that these costs will be passed on to consumers.

Expectations that the Fed will cut rates in September decline, central bank divergence supports USD/CHF strength

Although the interest rate differentials are largely priced in, improved risk sentiment has also pushed out expectations of a rate cut in September.

According to the CME FedWatch Tool, the probability of a 25 basis point rate cut in September is now sitting at 52.7% , down from 65.4% this time last week. Meanwhile, the likehood that rates will remain at current levels at the same meeting has climbed to 46.0%, increasing from 29.7%.

Fed Governor Adriana Kugler's comments on Thursday reinforced the hawkish narrative, saying that monetary policy should remain restrictive for "some time." The main objective for the majority of Fed members is to ensure that inflation returns to the objective target of 2%, keeping price pressures constrained.

USD/CHF eyes further gains as bearish momentum fades above 0.8000

The USD/CHF daily chart is currently displaying signs of a short-term bullish reversal following a sustained downtrend.

Price action has recently broken above both the 20-day Simple Moving Average (SMA) at 0.7995, recovering above the 0.8000 psychological level and the 23.6% Fibonacci retracement level of the May-July decline at 0.8015.

This move is supported by a strengthening Relative Strength Index (RSI), which has risen above the 50 threshold, indicating a shift in momentum from bearish to neutral.

USD/CHF daily chart

The next immediate resistance lies at the 38.2% Fibonacci retracement level near 0.8103, which may act as a short-term target for buyers. If this level is cleared, further upside toward the 50% and 61.8% retracement levels at 0.8174 and 0.8246, respectively, becomes more plausible.

On the downside, support is now seen at the previous resistance zone around 0.7995, with stronger support at 0.7950. A sustained move below these levels would invalidate the current bullish setup. Overall, the chart structure suggests a potential short-term upward continuation, provided the pair maintains support above the 0.7995-0.7950 range.