Trading the Swiss Franc 14-year breakout – USD/CHF, AUD/USD, BTC/USD
Weekly thoughts
This week the Swiss franc strengthened to around 0.80 per US dollar, its highest level since July 2011. For forex traders that shows up as USD/CHF hitting a near 14-year low.
Clearly more buyers than sellers of the Swiss franc! But why?
The Swiss franc is a known haven currency - meaning it appreciates in times of uncertainty. The same can be said of the US dollar, except the dollar is not behaving that way now.
What’s especially interesting about this surge in the franc is that the Swiss National Bank just cut Swiss interest rates to zero. Yes, back to ZIRP (zero interest rate policy). However, the US Federal Reserve just left interest rates unchanged at 4.25% to 4.5%.
As you’re probably aware, the currency with the higher interest rate should be the stronger one (in this case, the US dollar). Again it’s not happening.
In short - the Swiss franc is gaining on lower interest rates and the US dollar is falling on stable & much higher rates.
There are, of course, other factors at play. There are rising expectations of Federal Reserve rate cuts - possibly as soon as September. Not to mention economic uncertainty over upcoming trade deadlines linked to President Trump’s tariff policies.
There is also Speculation that Trump could replace current Fed Chair Jerome Powell and nominate a dovish Chair as early as September or October - which has added to concerns over the central bank’s independence.
What next for CHF?
As traders, what are the key points here? To us - 3 things
- New multi-decade highs are bullish (reasons to buy, not sell!).
- The Swiss franc is strengthening despite central bank policy that should weaken it.
- The US dollar keeps trending lower.
Piecing that all together, we’re looking at a breakout to multi-year highs in the franc, backed up by breakdowns in the US dollar across several pairs (e.g. AUD/USD & BTC/USD), which is in the direction of the established dollar downtrend.
As such, we’re looking into buying the CHF strength, selling the USD weakness when the opportunities present themselves.
Setups & signals
We look at hundreds of charts each week and present you with three of our favourite setups and signals.
USD/CHF
Setup
The pair looks to have broken down from a bear flag pattern, confirming an earlier breakdown to decade-lows this year after holding resistance at 0.84.
Signal
On the daily chart, there is an established downward channel, where rebounds to the top of the channel (also, 20 SMA) could offer short opportunities in line with the longer term downtrend.
AUD/USD
Setup
The Aussie dollar pair has just made a strong weekly bullish engulfing pattern that engulfs the prior 5 weeks right into major resistance caused by the 61.8% Fibonacci retracement.
Signal
A false breakdown below 0.64 triggered a hammer reversal on the daily chart, which eventually triggered a breakout of the prior highs just above 0.65. While over 0.65 we’d expect a continuation move higher.
Bitcoin
Setup
After a false breakdown below $100K, Bitcoin just made a bullish engulfing pattern that engulfed the prior 3 weeks - possibly forewarning of a breakout to a new ATH.
Signal
The false break below $100k is more clearly seen on the daily chart with a follow-through surge over $108K to re-test down-sloping resistance through the previous two peaks.
Author
Jasper Lawler
Trading Writers
With 18 years of trading experience, Jasper began his career as a stockbroker on Wall Street in New York City before sharpening his analytical skills at top trading firms in the City of London.
