USD/CHF was little changed on Thursday, with choppy two-way moves, and was near 0.7845 at the time of writing. Trading was cautious as markets tracked US-Iran tensions, including developments in the Strait of Hormuz.
The US Dollar found support despite some intraday softness, with the US Dollar Index (DXY) near 98.67 after an intraday high of 98.80. US President Donald Trump wrote on Truth Social that the US has “total control over the Strait of Hormuz” and said he ordered the Navy to “shoot and kill any boat” placing mines there, adding the route is “sealed up tight” until Iran can make a deal.
Usd Chf Market Backdrop
US data releases were mixed. The preliminary S&P Global Manufacturing PMI rose to 54 in April from 52.3 in March, a 47-month high, while Services PMI increased to 51.3 from 49.8, a two-month high.
US Initial Jobless Claims rose to 214K in the week ending April 18, above the 212K forecast and up from 208K. On the daily chart, USD/CHF stayed below the 100-day SMA near 0.7865 and the 200-day SMA around 0.7937, with RSI below its midline and ADX near 26.
The current standoff between US and Iranian forces is creating significant uncertainty, overriding the bearish technical signals for USD/CHF. This environment suggests that implied volatility is likely undervalued and could rise sharply in the coming weeks. We should therefore consider strategies that profit from a large price move, regardless of the direction.
We saw a similar dynamic during the initial weeks of the Ukraine conflict back in 2022, when the Cboe Volatility Index (VIX) jumped from around 20 to over 35. A sudden military escalation or a surprise diplomatic breakthrough in the Strait of Hormuz could easily trigger a comparable spike in currency volatility. The current choppy price action is likely the calm before a more decisive move.
For those anticipating a breakout, purchasing long straddles or strangles using options would be a prudent way to position for a large swing. Using the key moving averages as a guide, strike prices around the 0.7850 level could capture a move in either direction. This approach minimizes the risk of guessing the outcome of the geopolitical situation incorrectly.
Hedging And Volatility Strategies
The mixed US economic data further complicates directional bets, making hedging essential for any existing positions. While strong PMI figures, with manufacturing at a 47-month high of 54, suggest a robust economy supporting the dollar, the slight uptick in jobless claims to 214K introduces a note of caution. These conflicting signals make outright long or short positions in the spot market particularly risky right now.
We are witnessing a classic safe-haven tug-of-war, with both the US Dollar and the Swiss Franc vying for capital, which is contributing to the pair’s lack of clear direction. This suggests that if the standoff continues without a major change, the pair could remain range-bound. In that scenario, selling option premium through strategies like an iron condor, with strikes placed safely outside recent highs and lows, could generate income from the ongoing indecision.
