AUD is a very popular and heavily traded currency, but also a highly volatile one. It is closely linked to China and the demand for commodities. AUD is known as a commodity currency. Australia’s inflation has declined post-COVID but has not yet reached the desired levels.
CHF, on the other hand, is known as one of the most stable currencies. Switzerland is and has always been very independent of other countries, and the currency is closely tied to the price of gold. As such, CHF serves as a safe haven during times of turmoil. Swiss inflation remained low even during COVID, thanks to the country’s significant stability, in contrast to inflation elsewhere in the world.
The key difference between AUD and CHF lies in the interest rates of their respective countries, which is also what makes this currency pair intriguing.
In the context of high global inflation, Australia was relatively slow to start raising interest rates. It is also expected that they will be late in lowering them again. This means that the interest rate set by the Reserve Bank of Australia (RBA) stands at 4.25%.
In contrast, the interest rate set by the Swiss National Bank (SNB) is very low, as Switzerland has a history of maintaining low rates, contributing to their strong economy. The Swiss interest rate is 0.5%. This means that buying AUD against CHF results in a positive interest rate (a positive swap) on your investment for the time you hold it.
However, buying AUDCHF is not without risk.
Switzerland is one of the most stable countries in the world, and CHF is one of the most stable currencies globally. It has low inflation, a strong economy, and its main sectors include finance, pharmaceuticals, manufacturing, and tourism. This makes the country a very attractive investment, increasing demand for CHF.
In contrast, Australia, with its strong ties to China, finds itself in a difficult situation at present. With a weak Chinese economy, the U.S. under Trump threatening punitive tariffs on imports to the U.S., and pressured commodity prices, AUD is likely to face challenges through 2025.
But, with a 4% difference in the interest rates of the two countries, there is an incentive to explore opportunities to buy AUDCHF.
Technical Analysis
Looking at AUDCHF from a technical perspective, it is clear that during crises, AUD drops significantly against CHF but tends to bounce back. Currently, we are near an all-time low in AUDCHF. However, since 2012, AUD has shown a continuous decline against CHF.
If a new trade war arises with Trump potentially re-entering the presidency, we could very well see a drop in AUDCHF. Historically, such events have caused declines of up to 30%, which must be considered.
Trading Opportunities in AUDCHF
- Around 0.57300:
This level could act as a resistance level in AUDCHF. It is likely that we may rise to 0.57300 before falling again, making this a relevant level to sell. In short positions on AUDCHF, one must be mindful of the daily overnight fee (negative swap), so traders should aim to enter and exit quickly, ideally within a few weeks.
Stop-loss: 0.590000
Target: 0.53900
- Around 0.53300:
This level could see a bounce upward. Therefore, I would consider placing a buy order here. Buying AUDCHF results in a positive swap, earning daily interest as long as the position is held. This allows for more flexibility with the stop-loss, which I would place at 0.51000, while keeping an eye on the trade.
Target: 0.56000
- In Case of a Trade War:
If there is a sudden large drop in AUDCHF, I would buy to capitalize on the likely bounce that follows, along with the positive swap.
When economic conditions improve and there is renewed investor interest in China, AUDCHF will be an excellent product to buy, particularly as long as the Australian interest rate remains significantly higher.