The US Dollar (USD) has shown notable strength at the start of the week, trading flat but maintaining a bullish bias as the Dollar Index (DXY) holds at 101.10, above the 20-day EMA at 100.19, with the Relative Strength Index (RSI) at 68.36 approaching overbought territory [2]. This performance is underpinned by the Federal Reserve's (Fed) hawkish stance, following a 25 basis points rate hike in September to the 3.75%-4.00% range, and signaling at least one more hike before year-end [2][3]. The CME FedWatch tool currently indicates a 68% probability of another rate hike in October [2].
The Swiss Franc (CHF) has weakened significantly against the USD, with the USD/CHF pair hitting a fresh high since May 2025, nearing the 0.8300 mark during the Asian session on Monday [1]. This decline is attributed to the widening interest rate gap between the Swiss National Bank (SNB), which kept its policy rate unchanged at 0% in September, and the Fed's comparatively hawkish outlook [1]. Technical analysis shows USD/CHF holding above the 200-day SMA at 0.7951, reinforcing a bullish trend, with initial demand seen at 0.8200 [1].
Geopolitical tensions in the Middle East have further supported the USD and crude oil prices. US President Donald Trump rejected an Iranian proposal to reopen the Strait of Hormuz and resume nuclear talks, and indicated that additional military strikes on Iran were possible before the US midterm elections [1][2][3]. Continued attacks by the Houthis in Yemen and Iran on Saudi Arabia have prompted traders to price in a geopolitical risk premium, favoring USD bulls and supporting prospects for further Fed tightening [1][3].
Gold (XAU/USD) has weakened below $4,200, reaching its lowest level since August 5, as elevated US bond yields and a strong USD drive flows away from the commodity [3]. The bearish backdrop for gold is reinforced by expectations of further Fed tightening and ongoing geopolitical uncertainties [3].
Looking ahead, market participants are awaiting key US economic data releases, including Nonfarm Payrolls (NFP) for September, JOLTS Job Opening, PCE Price Index, ADP Employment Change, and ISM Manufacturing PMI, which are expected to drive Fed rate expectations and USD volatility [2]. Traders are also monitoring speeches from influential FOMC members for additional market direction [1].
CONCLUSION
The US Dollar's strength, driven by Fed policy divergence and geopolitical risks, has pressured both the Swiss Franc and gold prices, with USD/CHF reaching multi-year highs and gold falling to its lowest since August. Market participants are closely watching upcoming US economic data and FOMC commentary for further cues. The prevailing bullish sentiment for the USD suggests continued volatility and potential for further gains in the near term.