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 drawbacks. It will then look at how to start trading the USD/CHF in 2018, from capitalising on volume and volatility with charts and strategy to signals and trading hours.

USD/CHF Trading Brokers

Forex.com boast a global reputation. Regulated in the UK, US and Australia they offer a huge range of markets, not just forex, and offer very tight spreads and a cutting edge platform.
New Forex broker Videforex can accept US clients and accounts can be funded in a range of cryptocurrencies. Payouts reach 95% per trade.
The leading US trading Exchange. Nadex offer genuine exchange trading to US clients on Binary Options. Fully regulated by the CFTC.
Zulutrade provide multiple automation and copy trading options across forex, indices, stocks, cryptocurrency and commodities markets
IB Boast a huge market share of global trading. With a minimum deposit of $10,000 however, they remain an option for larger traders only.
One of the largest discount brokers in the US, with a fixed trading commission and access to a large array of trading products and securities
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Chart

Breaking Down ‘USD/CHF’

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

  1.  The US dollar is the world’s largest and most actively traded currency. In fact, it represents approximately half 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 use 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 shits, and technical characteristics. So, looking to the development of the pound may help you predict fluctuations in the USD/CHF.
  • Diverse trading vehicles – 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 as follows:

  • Safe haven dilemma – There is some ambiguity to factor in 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/CHD 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 effects 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. So, there are certain reports to keep a track of. Employment data, jobless claims, retail sales growth, plus PMI data, can all cause shifts in USD/CHF rates.
  • Wars & natural disasters – Events that affect trading partners of either country or that directly impact the two respective countries, can all be felt in the USD/CHF currency pair. This highlights the need to keep abreast of live news updates.

USD/CHF Currency Correlations

Currency pairs do not move independently of each other. Many are tied to the movement of other pairs. This is known as correlation. Correlation is a statistical measure, ranging from -1 to+1. You can have either:

  • Positive correlation – This is when FX pairs move in line with each other. The GBP/USD, AUD/USD, and EUR/USD currency pairs are all positively correlated. This is because the US dollar is the counter currency. This means any change to the US dollar is felt in all pairs.
  • Negative correlation – This is when currency pairs move in the opposite direction. This is seen in the USD/CHF, USD/JPY, and USD/CAD pairings. This is a result of the US dollar being the base currency.

Often the USD/CHF currency pair is negatively correlated with the EUR/USD. So, 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 appeals 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.

Also note – 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 out 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:

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

On top of breaking news announcements, these sources can also provide a number of other useful services. To name just a few:

  • 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 now boasts the sixth-largest volume in the global forex space. Originally though, the history of the pair represented steady investment connections between the US and Switzerland.

Direct investments from the US to Switzerland have hit a massive $129.8 billion. As such, over the years the US has become Switzerland’s top destination for foreign direct investment (FDI).

Both currencies have also benefited from strong trade ties. Switzerland is the US’s second-largest trade partner after Germany, representing 10% share of Switzerland’s foreign trade. Switzerland is the US’s 17th largest trading partner, worth just 1.4% of total US trade.

These trade and investment connections shaped much of the USD/CHF relationship for many years. Today, however, current prices and forex live charts respond to more current events.

Recent History

To some extent, the great depression shaped the Swiss franc we know today. It appreciated against all other major trading partners, except from the Japanese yen. It grew so strong the SNB actually stepped in to intervene in the currency market.

The SNB aimed to half the appreciation of the franc against the euro. However, the intervention had clearly failed by 2014. So spectacular was the failure that the franc surged, rallying over 25% in just a few minutes.

It is clear then that the SNB play a vital role in the FX market. This is particularly the case for those trading binary options based on the USD/CHF pair.

Many people do not realise the extent that movement in your live, forex interactive chart is influenced by past events. Events that if you know happened before, allow you to analyse and predict the effects on FX rates this time around.

Role of US DollarForex day trading with USD/CHF pair

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:

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

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)
  • Non-farm payrolls
  • ISM Non-manufacturing
  • ISM Manufacturing
  • Trade Balance
  • Federal Reserve Minutes
  • Retail Sales
  • Industrial Production

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 meetings are every six weeks and economic projections will be published along with press conferences every two to three weeks. All will result in the US dollar moving sharply against other currencies, including the Swiss franc.

Role of Swiss FrancTrading on USD/CHF currency pair

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, focussing 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 neighbouring 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 chocolate.

Overall, your daily forex analysis will be influenced by the huge role the Swiss franc plays as a stable, safe haven currency. Not to mention the support of the formidable banking system it has behind it.

Final Word

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, 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.