The Psychological Floor Evaporates
The psychological floor has evaporated. For a decade, the 0.90 level in USD/CHF functioned as a definitive boundary for global capital flows. That boundary is now a ceiling. As of October 18, 2025, the spot price sits at 0.8420, marking a definitive break from a structural regime that defined the post-2015 currency landscape. This is not a standard correction. It is a fundamental repricing of the Greenback against the most resilient currency in the G10. The catalyst is a lethal combination of a dovish Federal Reserve pivot and an idiosyncratic policy shift within the Swiss National Bank (SNB).
Institutional desks are no longer debating if the pair will fall further, but how fast it will reach the 0.70 handle. Per the latest Reuters market intelligence, the liquidation of long-dollar positions has accelerated following the September FOMC meeting. The Federal Reserve’s commitment to prioritizing labor market stability over the last remnants of inflation has stripped the dollar of its yield advantage. In contrast, the Swiss Franc has transitioned from a currency the SNB actively suppressed to one it now views as a strategic bulwark against imported inflation.
The Yield Differential Death Spiral
Capital follows yield. When the Federal Reserve signaled a terminal rate trajectory significantly lower than the 2024 peaks, the carry trade narrative died. The Swiss National Bank, led by its current board, has opted for a policy of ‘benign neglect’ regarding Franc strength. Unlike the 2011 or 2015 interventions, the SNB’s current balance sheet management suggests it is comfortable with a stronger CHF to offset the rising costs of energy imports. This shift in the SNB’s reaction function is the ‘Alpha’ that many retail traders missed.
Visualizing the Decade-Long Support Breach
The SNB Balance Sheet Shift
The mechanics of this breakdown are visible in the SNB sight deposit data. For years, the Swiss National Bank expanded its balance sheet by selling CHF and buying foreign assets. That trend has reversed. The SNB is now actively reducing its foreign exchange reserves, effectively performing a quantitative tightening that sucks liquidity out of the USD/CHF pair. When the world’s most disciplined central bank stops fighting its own currency’s appreciation, the path of least resistance is lower.
| Indicator | October 2024 Value | October 2025 Value | Change (%) |
|---|---|---|---|
| USD/CHF Spot | 0.9120 | 0.8420 | -7.67% |
| SNB Policy Rate | 1.25% | 1.00% | -0.25% |
| Fed Funds Rate | 5.25% | 4.25% | -1.00% |
| Swiss CPI (YoY) | 1.4% | 1.1% | -0.3% |
The Asymmetric Risk of 0.70
Technical analysts often cite the 0.70 level as a ‘black swan’ target, but current macro-fundamentals make it a mathematical probability. Purchasing Power Parity (PPP) models have long suggested the Swiss Franc was undervalued due to SNB suppression. With that suppression removed, the currency is free to revert to its mean. Per Bloomberg Terminal pricing, the one-year risk reversals for USD/CHF are now skewed heavily toward puts, indicating that the institutional market is hedging against a rapid descent rather than a recovery.
Traders must look at the ‘Real Effective Exchange Rate’ (REER). While the nominal exchange rate looks expensive, the inflation differential between the U.S. and Switzerland means the Franc is not as overvalued as it appears in real terms. This gives the SNB significant room to allow the currency to appreciate without crushing the Swiss export sector, which has pivoted toward high-value pharmaceuticals and precision engineering—sectors less sensitive to currency fluctuations than traditional manufacturing.
Structural Repatriation
A final driver of this collapse is the repatriation of Swiss capital. During the years of negative interest rates in Switzerland, Swiss institutions flooded the U.S. markets in search of yield. As U.S. rates normalize downward and Swiss rates remain positive, that capital is returning home. This steady stream of ‘buy Franc, sell Dollar’ orders creates a persistent bid that technical indicators like the RSI are failing to capture, as the move is driven by structural flows rather than speculative momentum.
The focus now shifts to the SNB’s first quarterly policy assessment of 2026. Market participants should monitor the March 19, 2026, meeting for any shift in the bank’s stance on ‘inflation protection’ versus ‘export competitiveness.’ If the SNB maintains its current indifference to the 0.80 level, the technical vacuum between 0.80 and 0.70 will likely trigger a high-velocity liquidation event that could redefine the G10 currency order for the next decade.
