The Swiss franc has been one of the best-performing currencies in 2023 as investors embraced its role as a safe haven. The USD/CHF exchange rate tumbled to a low of 0.8405 on Friday, its lowest level since 2011. Similarly, the GBP/CHF and EUR/CHF rates also continued their downtrend.

Swiss franc as a safe haven

De-dollarisation has been one of the biggest themes in the financial market this year. A few months ago, it made headlines in South Africa where BRICS members met. This view continued this week after Russia and Iran reached a deal to trade using their local currencies instead of the dollar.

In my article a few months ago, I wrote that moving away from the dollar would be a difficult task. Besides, there was substantial distrust among the BRICS members like China and India. Also, the dollar has been an integral part of the global economy for decades.

Instead of forming a new BRICS currency, I recommended the use of the Swiss franc as an alternative to the dollar. For one, it has been a stable currency and Switzerland is usually neutral on so many global issues.

The USD/CHF exchange rate jumped as investors embraced its role as a safe haven as global risks rose. There are risks in the Middle East, where Houthis are terrorising ships in the region. A war between Israel and Hamas is continuing.

Further, there are lingering tensions between Western countries and China, the second-biggest economy in the world. The war in Ukraine is continuing in high gear. More geopolitical risks are expected to continue.

The USD/CHF pair also crashed as investors cheered the hawkish tone by the Swiss National Bank (SNB). The bank decided to deliver several rate hikes as it abandoned its historic dovish tone. 

Most recently, the Federal Reserve has embraced a relatively dovish tone as officials point to at least three rate cuts in 2024. The betting market predicts as much as six rate cuts during the year. This view has pushed the US dollar index to $100, below the YTD high of over $107.

USD/CHF technical analysis

USD/CHF chart by TradingView

Turning to the weekly chart, we see that the USD to CHF exchange rate has been in a deep sell-off in the past few months. Most recently, the pair dropped below the key support at 0.8760, its lowest swing in January 2021. It also flipped the support at 0.8552 (July 2023 low) into a resistance level.

The pair remains below the 50-week and 25-week Exponential Moving Averages (EMA) while the Relative Strength Index (RSI) has moved to the oversold level. Therefore, the pair will likely continue falling as sellers target the key support at 0.8325.

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