Trading USD/CHF

The USD/CHF currency pair, also known as ‘Swissy’, is popular in the forex space despite coming with certain challenges. This page will break down the history of the USD/CHF relationship, including its benefits and risks. We also look at how to start trading the USD/CHF in 2023, by capitalising on volume and volatility with charts, strategy, signals and trading hours.

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USDCHF Chart by TradingView

Breaking Down ‘USD/CHF’

Firstly, what does USD/CHF mean? The exchange rate you see is simply how many Swiss francs (the quote currency) it will cost to buy one US dollar (the base currency).

The USD/CHF is one of the most popular traded currency pairs on the forex market. The CH stands for ‘Confoederatio Helvetica’. This is Latin for Switzerland. Whilst the F stands for ‘franc’.

But what makes this pairing so interesting?

1. The US dollar is the world’s largest and most actively traded currency.

1. In fact, the USD/CHF currency pair represents approximately half of the trading volume of all major currencies.
2. The Swiss franc is popular because Switzerland holds an impressive one-third of the world’s privately-owned wealth in its banks.

It’s also worth bearing in mind that Switzerland is not the only country to use the Swiss franc. Liechtenstein, located between Switzerland and Austria and consisting of just 35,000 inhabitants, also uses the Swiss franc.

Why Day Trade USD/CHF?

With so many currency pairings available, why does the USD/CHF currency pair deserve your attention?

• Liquidity – Despite being relatively less volatile than other pairs and less liquid than the euro and pound, this pair is still relatively straightforward to trade. Whilst there is an array of influences to consider, rates mainly depend on political and economic instability. This is particularly true when international turmoil strikes, as investors rush to the supposed safety of the Swiss franc.
• Pound similarities – If you have traded or do trade the pound, then the USD/CHF makes for a smooth transition. The British pound and Swiss franc share similar attributes in terms of volatility, price shifts, and technical characteristics. So, looking at the development of the pound may help you predict fluctuations in the USD/CHF.
• Diverse trading instruments – Due to volume and volatility, you have a number of different USD/CHF trading vehicles at your disposal.

• From ETFs to futures, options, including E-micro USD/CHF futures.
• Stable price information – Due to the regular and consistent flow of economic data from the US, Switzerland, and Europe, conducting fundamental analysis is comparatively easy.
• Availability of resources – In some ways, making money from online chart investing is more straightforward today.You have access to plenty of bar charts, graphs, and commentary websites, not to mention forums full of advice from experienced traders.You even have weekly charts, forecasts, outlook, and the tools needed for Elliott wave analysis.

Drawbacks & Risks

Although the USD/CHF pair comes with a number of benefits, there are also certain drawbacks and risks you should be aware of.The most significant of which are:

• Safe haven dilemma – There is some ambiguity to consider when day trading the USD/CHF now.In times of crisis, both are considered reserve currencies.The problem is, it can be challenging to spot which one people will turn to.
• Dangers of leverage – Leverage and margin trading allow you to borrow capital to increase your position size.Whilst this may boost potential profits, it can also substantially increase losses.
• Volatility – Compared to some currency pairs, including many of the majors, the USD/CHF simply does not promise the same levels of volatility.

The result of this is less significant spikes and drops, and therefore, less opportunity to generate profits.

• Automated competition – Profiting from the USD/CHF today means battling with an increasing number of sophisticated algorithms. Even with monthly charts to hand, live streaming data is being analysed and acted upon almost instantaneously by any number of trading bots.

Influences on Movement

Trading the USD/CHF currency pair relies on a detailed understanding of what influences changes in prices and rates. Unfortunately, candlestick charts cannot give you the context that can often prove invaluable.

So, what affects movement in the USD/CHF exchange rate?

• Monetary policy – The actions of both the Federal Reserve (Fed) and the Swiss National Bank (SNB) will impact price action. The SNB, for example, is known to take an active role in maintaining exchange rates and taking steps to reduce recession and currency deflation. So, keep an eye out for the quarterly SNB announcements on interest rates and policy.
• Swiss economic data – Economic strength and weakness cause price movements. So, there are some specific announcements that can cause USD/CHF spikes. These include the Swiss Purchasing Managers’ Index (PMI), the Swiss Consumer Price Index (CPI), plus the KOF Economic Barometer. This final resource provides twenty-five economic indicators that make predictions on how the market will perform over the next two quarters.
• US economic data – The strength of the US economy will influence the currency pair.

There are several reports to keep track of when it comes to the USD/CHF exchange rates. Employment data, jobless claims, retail sales growth, and PMI data can all cause fluctuations in the rates.

Events such as wars and natural disasters that affect trading partners or directly impact the two countries can also affect the USD/CHF currency pair. It is important to stay updated on live news updates in order to stay informed.

USD/CHF Currency Correlations

Currency pairs are not independent and are often tied to the movement of other pairs. This is known as correlation, which is a statistical measure ranging from -1 to +1. There can be either positive or negative correlation.

• Positive correlation occurs when FX pairs move in the same direction. The GBP/USD, AUD/USD, and EUR/USD currency pairs are all positively correlated because the US dollar is the counter currency. This means that any change to the US dollar is felt in all pairs.
• Negative correlation occurs when currency pairs move in the opposite direction. This is seen in the USD/CHF, USD/JPY, and USD/CAD pairings because the US dollar is the base currency.

The USD/CHF currency pair is often negatively correlated with the EUR/USD. Traders usually sell the USD/CHF when the EUR/USD price surges.

The opposite then happens when the USD/CHF rallies.

There is also a negative correlation between the USD/CHF and the GBP/USD pairs.This is a result of the positive correlation of the Swiss franc, euro and British pound.

Switched on day traders will use this information to their advantage.Looking to other currency pairs may allow you to make more accurate short-term projections as to the movements of the USD/CHF.

USD/CHF Day Trading Strategy

Timing

One of the things that appeal about forex trading and investing is that markets are open 24/7, and you actually get a lot more profitable trading time with the USD/CHF pair than many others.You can trade the pair from Sunday evening until Friday afternoon in the US.However, both volume and volatility will vary throughout the day.

You will find both highs and lows during each 24-hour cycle, but bid-ask spreads will widen during quieter periods, then narrow during active periods.So, when is the best time to trade the USD/CHF pair?

The biggest daily moves often take place when Eurozone and Swiss economic data is released, plus at opening hours for equity, options and futures exchanges.A lot of the data mentioned on this page is usually released between 02:00 and 05:00 ET.The half an hour to one hour before these releases and the three hours afterwards will see the most activity.

Also, some US economic releases can come between 08:30 to 10:00 ET.Again, the periods preceding and following these releases can trigger price action.

So, many strategies may benefit from focussing their attention on these time periods.

Traders should also note that forex action often drops significantly around the US lunch hour.

Example

If you’re looking for a simple, straightforward USD/CHF day trading strategy, then consider the example below.

Whilst some traders prefer a 5-minute or 15-minute real-time chart, for this basic strategy, a 1-hour chart is recommended.

You then simply need to mark the high and low of each candle of the trading day.Then your pending order buy should be entered 10 pips above the high.Whilst your pending order sell should be entered 10 pips below the low.

You will also need to minimise your risk and protect against substantial losses.So, place a stop-loss 30 pips from your buy/sell order.

The example here is basic.If you are looking for more detailed strategies, take a look at our strategy page.

News

Some people prefer day trading the USD/CHF currency pair using historical price charts and complex data.Whereas some focus on trading breaking news.News updates can quickly influence market sentiment.

However, to profit from these announcements you need to be tuned in and ready to react at a moment’s notice.Plus, you need access to reliable and thorough sources.

Below you will find some of the most popular and relevant news resources:

• Google Finance
• Yahoo Finance
• Forex factory
• Bloomberg
• Reuters
• CNBC

On top of breaking news announcements, these sources can also provide a number of other useful services:

• Forecasts for this coming week
• Exchange forecasts and daily analysis
• USD/CHF specific trading definitions
• Price history reviews and yearly averages
• Alternative trend views and perspectives
• Long-term data, from 20 years to 30 years worth of charts
• Technical outlook and latest analysis from experienced traders

So, if day trading on the USD/CHF using the news is part of your plan, all of the above are resources worth exploring.

History

Early History

Since the launch of the Swiss franc in 1850, the franc has enjoyed enormous strength as a currency.

Today, the USD/CHF pair is ranked sixth in terms of volume in the global forex market. The pair’s history reflects a long-standing investment relationship between the US and Switzerland. Direct investments from the US to Switzerland have reached a staggering $129.8 billion, making the US Switzerland’s top destination for foreign direct investment (FDI).

Both currencies have benefitted from strong trade ties. The US is Switzerland’s second-largest trade partner after Germany, accounting for 10% of Switzerland’s foreign trade. Conversely, Switzerland only accounts for 1.4% of total US trade and is the 17th largest trading partner of the US.

These trade and investment connections have influenced the USD/CHF relationship for many years. However, current prices and forex live charts respond to more recent events.

Recent History

The Swiss franc we know today was shaped by the Great Depression. It appreciated against all major trading partners, except the Japanese yen, and grew so strong that the Swiss National Bank (SNB) intervened in the currency market to halve its appreciation against the euro. However, the intervention failed by 2014, causing the franc to surge by over 25% in just a few minutes.

The SNB plays a vital role in the FX market, especially for those trading binary options based on the USD/CHF pair. It’s important to note that past events can influence movement in live forex interactive charts.

Events that if you know happened before, allow you to analyse and predict the effects on FX rates this time around.

Role of US Dollar

Whether your day trading strategy relies on support and resistance levels, daily pivot points, or breaking news, having a feel for the staggering role the US dollar plays will help you anticipate future price movement.

Below are some of the key roles the US dollar plays:

• Some countries adopt the US dollar instead of their own or peg their own currency to its value.
• The US is the second-largest trading nation in the world, following China.
• Oil transactions by OPEC countries are often carried out in the US dollar.
• Many banks all over the world hold currency reserves in the US dollar.
• The US accounts for a staggering 25% of the global nominal GDP.
• The US dollar is the most popular traded currency in the world.
• It is commonly used to settle international transactions.

Just a brief look at a long-term USD/CHF chart will show you how prices and average daily ranges shift when announcements are made about the US dollar.

To understand whether the US dollar will strengthen or weaken against the Swiss franc then, you will need to consider a number of important economic indicators.

The most important of which, are as follows:

• Consumer Price Index (CPI)
• Producer Price Index (PPI)
• ISM Non-manufacturing
• Federal Reserve Minutes
• Industrial Production
• ISM Manufacturing
• Non-farm payrolls
• Trade Balance
• Retail Sales

So, USD/CHF technical analysis and forecasts for today should take note of important data releases in the economic calendar.

Also, bear in mind the Federal Open market Committee holds eight regularly scheduled meetings per year and economic projections will be published along with press conferences every three weeks.

All will result in the US dollar moving sharply against other currencies, including the Swiss franc.

Role of Swiss Franc

Getting to grips with USD/CHF day trading means understanding what drives the Swiss economy and franc. Switzerland has famously remained neutral in all major wars in Europe. It is also surrounded by the Alps and considered a stable, isolated nation. This has resulted in the Swiss franc becoming a safe haven currency when turmoil strikes.

This reputation is bolstered by their role in private banking. Despite rules loosening somewhat in the last ten years, Switzerland remains a huge global player in the private banking, insurance, and investment management sectors. They are home to global titans UBS and Credit Suisse.

However, focusing on economic activity in the Eurozone, which influences US movements, is perhaps more useful. 80% of Switzerland’s trade activity happens with the EU.

This means the SNB is often more concerned with its currency vs the euro than the US dollar. It usually only steps in if the franc is too weak or strong vs the euro. Why? Because this will benefit Swiss export businesses, that are mainly involved in trading with neighboring countries.

To a certain extent then, the role of the Swiss franc and the size of the economy is determined by the successes of their major exporting industries. You will know of two of their big exporting industries, watches and pharmaceuticals.

Overall, your daily forex analysis will be influenced by the huge role the Swiss franc plays as a stable, safe-haven currency.

Final Word on USD/CHF Trading

Day trading on the USD/CHF currency pair promises volatility, volume and liquidity. However, generating profits can prove challenging as the Swiss franc is seen as a safe-haven currency.

You will need to use in-depth technical analysis, calling on charts, patterns, the latest foreign exchange news, plus a range of economic resources and indicators. It is also important you find the right broker for your needs, who will facilitate fast and cost-effective trading.

If you can do all of the above, then you’re one step closer to joining the likes of hugely successful forex traders, such as George Soros and Richard Dennis.

For more guidance, see our forex page.

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