The Swiss franc has gone vertical this year as it became a refuge to most investors as global risks jumped. The USD/CHF exchange rate plunged to a low of 0.8140 on Friday, its lowest level since 2011. It has fallen by almost 12% from its highest level in 2024.
Swiss franc as a safe haven
The USD/CHF pair has plunged this year as investors moved to its safety as geopolitical risks rose. Most of these risks have jumped because of Donald Trump, who has imposed substantial tariffs on all trading partners.
A trade war has then ensued between the United States and China, the two biggest economies globally. As a result, the US is now charging a 145% tariff on most Chinese imports, while China is charging 84%.
The US has also imposed a 10% tariff on Switzerland, a country that exports goods like gold and pharmaceutics to the United States.
Therefore, all these factors have pushed investors to the Swiss franc, the best safe haven globally. The Swiss franc is a safe haven because Switzerland is usually neutral on most situations. It only took sides when Russia invaded Ukraine in 2022.
Switzerland also has one of the best fiscal policies globally. Its total public debt stands at just $275 billion, giving it a debt-to-GDP ratio of 33%. Most notably, analysts believe that the county’s debt will keep falling to $294 billion in the next few years.
Switzerland’s debt is usually lower than other countries’ because of the debt brake mechanism, which limits government spending in various economic cycles.
Therefore, investors believe that Switzerland is one of the best places to put their money, a trend that may keep going on as risks rise.
The USD/CHF pair has also slumped as recession risks remain in the United States. Analysts see the country sinking into a recession later this year as the volume of trade falls.
USD/CHF technical analysis
The daily chart shows that the USD to CHF exchange rate has crashed in the past few months, moving from a high of 0.9200 to in January to 0.8177 today. It has just formed a death cross pattern as the 50-day and 200-day moving averages have crossed each other.
The pair has also moved below the key support level at 0.8375, the lower side of the cup and handle pattern shown in red. A C&H pattern is one of the most popular continuation signs in the market. The Relative Strength Index (RSI) has plunged to the extreme oversold point at 19, while the Directional Movement Index (DMI) has jumped.
Therefore, the downtrend will likely continue as sellers target the psychological point at 0.8000 in the near term. The bearish outlook will be invalidated if the pair jumps above 0.8375.
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