This currency pair is also referred to as the ‘Swissy’. And while having foreseen challenges in the forex space, the USD/CHF is still popular. This page will help you understand the relationship of USD/CHF currency pair. Also, we will include some benefits and risks, strategies for trading hours, and how to capitalize on volume and volatility using charts. This page will also cover how to start trading the USD/CHF in 2019.
Breaking Down the USD/CHF
Table of Contents
The exchange rate of the USD/CHF means how much Swiss Franc is needed to buy an American Dollar. In this pair, the US Dollar is the base currency, and the quote currency is the Swiss Franc.
Why is the CHF called Swiss Franc? Well, CH stands for ‘Confoederatio Helvetica’ which means ‘Switzerland in the Latin language. The F stands for Franc. Due to its popularity, Swissy is one of the most popular currency pairs that are being traded in the forex market.
Here are the two straightforward reasons why this pair is so interesting:
- The fact that the US Dollar is the world’s most actively traded currency. It embodied almost half of all major currencies in trading volume.
- And for the Swiss Franc, it is popular because of the Swiss Banks that holds one-third of the privately-owned wealth in the world.
Switzerland is not the only one that uses the Swiss Franc, and it is also helpful to know that the country of Liechtenstein also uses the Swiss Franc. Liechtenstein is located between the nations of Austria and Switzerland, and it has a population of just 35,000.
Why Day Trade with USD/CHF?
Having many choices in currency pairings, here are the why’s, why this pairing brings interests to traders to make a daily trade.
- Liquidity – In spite of having less volatile and less liquid than other currencies in the same region such as Euro and Pound, Swiss Franc still is straightforward to trade. Given that there is a group of influences to consider, the rates of Swiss Franc is mainly dependent on the political and economic instability of the country. An example of this is, when an international fuss happens, investors will hold on to the assurance and safety of the Swiss Franc.
- Pound Similarities – British Pound and Swiss Franc are identical in terms of price shifts, volatility, and technical characteristics. Monitoring the development of the British Pound can help you foresee future fluctuations in the USD/CHF pair.
- Diverse Trading Vehicles – Traders have several options of trading vehicles for the USD/CHF because of the pair’s volume and volatility. This option includes E-micro USD/CHF futures, and from ETFs to futures.
- Availability of Resources – Resources in this industry are widely spread on the internet. Weekly graphs, bar charts, and commentary are accessible through websites. Websites also include forums with advice from experienced traders. With the availability of these resources, online chart investing is the way to make money and is more direct.
- Stable Price Information – Traders can easily conduct fundamental analysis since the flow of economic data is regular and consistent from the US, Switzerland and Europe.
Like all currency pairs, the USD/CHF also comes with drawbacks. Traders must learn and understand this drawback to avoid or lessen profit losses.
Below are the drawbacks:
- Safe Haven Dilemma – Day trading USD/CHF in 2019, births some uncertainty that needs to be considered. Both currencies are treated to be reserve currencies in times of economic crisis. The concern is, it is somehow challenging to pinpoint which of the two currencies people will pencil in.
- Dangers of Leverage – Having leverage and margin in trading is an excellent thing to increase your size’s position by borrowing capital. Leverage can surely increase your profit, in the same way, it could also lead you to a drastic loss.
- Volatility – The levels of volatility in this pair doesn’t promise the same levels of volatility compared to some major currency pairs. Being in this state, this pair doesn’t come with significant spikes and drops, which results in fewer profit generations.
- Automated Competition – As for today, sophisticated algorithms in this currency pair is a real battle in gaining profits for traders. Trading bots are the ones who do the analyzation of live streaming data, and the bots act on it instantaneously.
Influences on Movement
Charting using candlestick in this currency pair can give you invaluable context. This pair relies on a very precise judgement of why the prices and rates change.
Given are the reasons why there are movements in the USD/CHF exchange rate.
- Monetary Policy – Since the Swiss National Bank is one of the most secure banks in the world, it plays an active role in controlling exchange rates to avoid recession and the deflation of its currency. The SNB quarterly announces the announcements of interest rates and policy, so always keep yourself updated.
- Swiss Economic Data – Predictions in market performance for this pair for the next two quarters are based explicitly on the announcements from PMI or the Swiss Purchasing Managers’ Index, the KOF Economic Barometer, and CPI or the Swiss Consumer Price Index. The data from these announcements create twenty-five economic indicators that help traders to predict the ups and downs for this pair.
- US Economic Data – US economy’s strength inevitably can affect this currency pair. Traders must keep an eye on these data from the US economic growth in retail sales, employment and jobless claims, and the PMI data. All of these can cause shifts in the rates of USD/CHF.
- Wars and Natural Disasters – Natural disasters can directly affect these two countries economic situations. So, traders should always keep an eye on the latest news. News about wars must not be neglected in this currency pair.
USD/CHF Currency Correlations
Currency correlation measures the statistic of currency pairs, stretching from -1 to +1. Traders must be reminded that currency pairs do not move independently from each other. In this, traders can experience either:
- Positive Correlation – An example of this correlation are the following pairs; the GBP/USD, AUD/USD, and EUR/USD. When the rate of the US dollar changes, it will affect all the currency pairs, for the US dollar is the counter currency in all these pairs.
- Negative Correlation – The movement of each currency pair in this correlation is currencies move to opposite directions. It can be seen in these pairs, USD/JPY, USD/CHF, and USD/CAD. In this correlation, the USD is the base currency.
A good time to sell USD/CHF is when the price of EUR/USD increases because these pairs are negative correlated to each other, which is the total opposite when USD/CHF price increases.
The positive correlation of these currencies, which are; the Swiss Franc; Euro; and the British Pound is due to, the negative correlation of the GBP/USD and the USD/CHF pairs.
Use this given information for your advantage and look for currency pairs having a positive and negative correlation to help you generate projections and accurate predictions for the USD/CHF pair.
USD/CHF Strategy for Day Trading
Forex market is open 24/7, and this is the reason why trading and investing in this market is so lucrative. Day trading with the USD/CHF is more profitable than other major currency pairs. The days and time for trading the USD/CHF start from Sunday night to Friday afternoon. Keep in mind that both volume and volatility for this pair vary throughout the day.
The 24-hour cycle will show traders both the highs and lows and be aware during quiet periods, and it is the time where the bid-ask spreads get widen. On active periods the bid-ask spreads get narrower. Knowing the best trading time of the USD/CHF is such a value to gain profits.
Traders must wait for the release of the Eurozone and Swiss economic data considering that this is the best time to trade the USD/CHF pairs. Also, traders must consider the opening hours for future exchanges, options and equity. The release of the data that were mentioned is at intervals of 2:00 and 5:00 ET. Before the first thirty minutes to one hour of the release and three hours later, traders can witness or experience the most active period.
For US economic releases, it can happen at the time of 8:30 to 10:00 ET. During these releases, price action can be generated, and traders must take advantage and focus their attention during these times.
An important note indicates drops of forex action in the US is happening during lunch hours.
Instead of doing the 5-minute or 15-minute real-time chart that has been recommended by traders, create a 1-hour chart for your trade.
Trading day’s candlestick needs to be marked, specifically its highs and lows. Traders must enter ten pips above the high for their pending order buy, and ten pips below the low for pending order sell.
To minimize the risk and to protect substantial losses, traders should place the stop loss at 30 pips from buy/sell order.
It is a sample for a simple and straightforward day trading strategy for the USD/CHF pair.
There are lots of information about day trading the USD/CHF currency pair, and the news is one of those resources where you can acquire information. Though some traders do prefer historical charts and complex data, some prefer the latest news.
Tuning in to reliable and profound sources and being ready to perform in a short notice trader can generate profit.
Below are some popular and reliable resources for the latest news updates:
To name a few sources that provide other useful services, this is on top of the latest news announcements, the following are:
- Exchange forecasts for the coming week
- Daily analysis and exchange forecast
- A most recent analysis from experienced traders and their technical outlook
- History of price reviews and its average per year
- Specific trading definitions of the USD/CHF pair
- Perspective and alternative trend views
Explore using the news and the resources given above, if you plan to do day trading with the USD/CHF pair. It’s worth it, and it will pay off.
The steady connections in investment between Switzerland and the US made their currency pair the sixth-largest in the global forex market. The Swiss franc has proven its great strength since its release in 1850.
In the past years, direct investments from these countries have reached $129.8 billion. The record shows that Switzerland’s foreign direct investment (FDI) top destination in the US. The 1.4% total trade of the US is the 17’th largest trade which comes from Switzerland. It is also the second-largest trading partner next to Germany.
Trades from both countries cemented the relationship of the USD/CHF pair for many years. However, in these days, current events affect forex live charts and changes in the current prices.
The Swiss Franc has appreciated its rate counter to all its major trading partners, and the Japanese Yen is an exemption in this manner. And while the Swiss Franc showed a great increase, the Swiss National Bank needs to make a move to intervene in the currency market.
The SNB planned to cut the appreciation of the Swiss Franc against the Euro to half. Unfortunately, in 2014, the intervention failed. The failure caused the Euro to surged up to 25% in just minutes.
Traders must understand that the SNB played a big role in the Forex space, specifically to those traders who do binary trading with the USD/CHF currency pair. And traders also need to put in mind that past events influenced the interactive live forex chart. Using historical charts from the past, allowing traders to predict and analyze the effects on the forex space better at times.
Role of the US Dollar
For traders to easily anticipate future price movement, they need to understand the role of the US Dollar in this currency pair. Whatever strategies traders need to do in day trading, these following items can help traders understand some key roles the USD plays:
- Banks around the world hold US dollar for currency reserve.
- Instead of adopting their currency, countries use and adopt the US dollar. Others peg their currency value to the US dollar’s value.
- OPEC’s oil transaction often uses US dollars.
- It is the world’s most popular currency that has been traded.
- Due to its popularity, companies use US dollars to settle transactions internationally.
- China and the US are the first and second-largest trading nations of the world.
- 25% of the global nominal GDP is accounted to the United States.
By having information about the long-term USD/CHF chart, traders can see shifts in prices and daily average ranges when notices regarding the US dollar were made.
To understand whether each currency will strengthen or weaken against each other, traders must consider and monitor these economic indicators.
The following are as follows:
- Producer Price Index (PPI)
- Consumer Price Index (CPI)
- Manufacturing and Non-Manufacturing ISM
- Federal Reserve Minutes
- Trade Balance
- Non-farm Payrolls
- Industrial Production
- Retail Sales
The economic calendar for this currency pair should contain; Important data releases, technical analysis and today’s forecast.
And also remember, the meetings of the Federal Open Market Committee take place every six weeks, and the publication of economic projections that comes with press conference happens every two to three weeks. In these times, a clear movement of the US dollar against other currencies is visible, and this includes the Swiss Franc.
Role of Swiss Franc
Having an idea on what drives the economy of Switzerland will give you the right information about the day trades for this pair. The Alps surrounds the country, so it is considered as a stable, yet an isolated nation. It is because Switzerland stands neutral in all of Europe’s major wars. As a result, their currency is seeming to be a haven when crisis strikes.
Switzerland maintained its reputation in private banking, though its rules are somehow loosening for the past ten years. Switzerland plays a significant role globally when it comes to private banking, investment managing sectors, and insurance. And it is home for global titans, Credit Suisse and UBS.
It is more useful to focus on Eurozone’s economic activity, which influences the movements in the US. 80% of trade activities in Switzerland take place in EU.
It shows that SNB is more focused with its currency being traded in its neighbouring currencies, specifically the Euro. It basically will give more benefit s for Swiss export businesses.
Two of the biggest exporting industries in Switzerland are watches and chocolates. In this, Switzerland’s economy is determined on the successes of these industries export.
By having a terrific banking system, Switzerland’s currency is stable. It influences daily Forex analysis.
Being seen as a safe haven currency, day trading the USD/CHF currency pair will be challenging, though the promises of volatility, volume, and liquidity are still present.
In-depth technical analysis is needed in trading the USD/CHF pair. It includes charts, patterns, latest news on foreign exchange. Brokers can help traders to facilitate cost-effective trading faster. So, finding the right broker that can help you with your needs is significant.
Consider doing all, if not, most of the things that are mentioned above, this will bring you a step closer to be successful in forex trading. George Soros and Richard Dennis are two of the most successful persons in trading the USD/CHF currency pair.