Is it safe to buy USD/CHF amid hitting parity for the first time since 2019?

One of the strongest moves in the FX market this year is the one made by the USD/CHF pair. It currently trades at parity, meaning that 1 USD equals 1 CHF – something that did not happen since 2019.

It is yet another example of the demise of safe-haven currencies. The USD/JPY chart looks pretty much the same, but everyone blames the Bank of Japan’s policies for the weak yen.

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Yet, the USD/CHF chart looks similarly without the Swiss National Bank being in the headlines. Hence, one can say that investors dropped safe-haven currencies in 2022 and looked for safety in the almighty US dollar – the world’s reserve currency.

Are we close to a top?

It does not look like it, at least from a technical perspective. Classic technical analysis reversal patterns, such as the head and shoulders or the double top need time to form.

Fundamentals do not support a reversal as well. The Fed in the United States is not shy about expressing its willingness to deliver at least two more 50bp hikes in the next three months, so the dollar’s demand will likely continue.

The Swiss National Bank is known as one of the central banks that constantly intervene in the FX market by selling the Swiss franc. For years, it has been said that the Swiss franc is overvalued and does not reflect the economic reality.

That was because investors bought the frank in times of uncertainty – just like they bought the Japanese yen up until recently. But now, the game changed, and it did so at a time when many investors looked for these currencies to fulfill their safe-haven status due to the Russia-Ukraine war.

The USD/CHF is essential for currency traders because of its strong, inverse correlation with the EUR/USD. The EUR/USD is the most important currency pair on the FX dashboard, and a strong USD/CHF trend suggests that the EUR/USD weakness is set to continue.

With the move back to parity, not seen since 2019, the USD/CHF brings a bit of a relief to the Swiss National Bank. All these years, it had a hard time keeping investors away from the Swiss franc despite setting the interest rate in negative territory.