How to trade the USD / CHF currency pair? | R Blog RU


USD / CHF – US Dollar to Swiss Franc – is one of the major currency pairs in the Forex market. In this review, we will look at the factors affecting the USD / CHF quotes, as well as get acquainted with the ways to trade this pair.

Historical reference

The history of the Swiss franc dates back to the 1700s. At that time, a large number of different coins, including foreign ones, were in circulation in Switzerland. In an effort to move towards a single currency, the Swiss franc was introduced as the main currency throughout the country. The National Bank of Switzerland carries out the state monetary and foreign exchange policy.

Throughout its history, the Swiss franc has often been considered a haven of sorts. Historically, inflation of the franc was practically zero, and the presence of mandatory gold and foreign exchange reserves was also legislated in Switzerland. This requirement was canceled in 2000 due to amendments to the Swiss Constitution.

Thanks to the flexible exchange rate and sustainable development of the country’s economy, the Swiss franc is one of the most stable currencies in the world, in high demand as a reserve. The confidence of international investors is the reason for the upward trend in the exchange rate of the franc against many other national currencies.

Trading features of the USD / CHF pair

The USD / CHF pair belongs to the major currency pairs (majors). The USD / CHF currency pair is ranked 4th among the most traded pairs in the Forex market. It accounts for about 5% of the total daily trading volume.

Let’s consider the main trading characteristics of this currency pair:

  • Trading time – the pair is traded around the clock except weekends, the largest trading volume takes place during the European and American trading sessions. It is at this time that important economic indicators that can affect the pair’s rate are published, and the main movements in USD / CHF take place.
  • Volatility – the USD / CHF pair is moderately volatile, with average daily movements of 50-80 points. But during crises and against the background of falling stock markets, the pair is able to make strong movements of 150 or more points per day.
  • Spread – the pair belongs to the “majors”, therefore, due to the high liquidity, the spread on USD / CHF is minimal. On popular ECN accounts, the spread is usually less than 1 pip.

What factors influence the USD / CHF quotes?

The behavior of the USD / CHF pair is a kind of indicator showing the comparative state of the US and Swiss economies. The couple is influenced by economic indicators, speeches of political leaders and monetary policy of the central banks of these two countries.

Impact on the US dollar

The US dollar, as the world’s most traded currency, is influenced by many factors. Some of the most significant are the reports of the US Federal Reserve Bank (FRS). Decisions to change the interest rate can greatly affect the dollar and USD / CHF quotes.

The Bureau of Labor Statistics publishes data on unemployment and employment outside the US agricultural sector, usually on the first Friday of every month. Traders are keeping a close eye on this data as it could dramatically increase the volatility of the US dollar and of course affect the USD / CHF currency pair.

The most important factors influencing the dollar:

  • Change in interest rates of the FRS (Interest rate).
  • Unemployment Rate.
  • Data on jobs created in the United States (Nonfarm Payrolls).
  • GDP growth rate (GDP).
  • Inflation indices (CPI, PPI).
  • Industrial production (Industrial Production index).
  • Retail Sales.
  • Trade Balance.
  • Consumer Confidence Index.
  • Business Sentiment Index (ISM).
  • Public speeches by political leaders and the head of the Fed.

Impact on the Swiss franc

The Swiss National Bank is the main factor that can influence the Swiss franc and, through it, the USD / CHF pair. Decisions on interest rates, statements on monetary policy affect the franc exchange rate. The Swiss central bank does not like it when the franc is over-strengthening (this negatively affects Swiss exports), so it can sometimes even use foreign exchange interventions to depreciate the national currency.

The most important factors influencing the Swiss franc:

  • Decisions on the interest rate of the Swiss National Bank.
  • Unemployment rate in the Eurozone and Switzerland.
  • GDP growth rates.
  • Inflation rate in Switzerland.
  • Changes in the balance of imports and exports of the country.
  • Public speeches of political leaders and the head of the Central Bank.

You can learn more about the fundamental factors and their impact on currencies in the article: “What is fundamental analysis: where to get data and how to use it in Forex?”

How to trade the USD / CHF currency pair?

There are various trading approaches that can be used to trade the USD / CHF pair depending on your preferences. The pair can be traded using fundamental indicators, technical analysis, indicator strategies.

Trade on the foundation

This approach involves trading based on the analysis of fundamental factors. This can be both short-term news trading and long-term trading in anticipation of changes in interest rates or in connection with the crisis in the global economy.

Example:

Using the properties of the Swiss franc to act as a defensive currency during various crises, it is possible to sell the USD / CHF pair (buying the franc against the dollar) as investors flee to defensive assets. After the outbreak of the coronavirus pandemic in 2020, the pair fell from 0.9850 to 0.9200 francs per dollar in a few days.

USD / CHF – trading on the foundation

Trading by technical analysis

In this case, transactions are concluded based on the analysis of the chart of the currency pair. Here you can use both classical technical analysis and various author’s methods (Elliott or Wolfe waves, the strategies of Raschke, Sperandeo, Williams, Ross and others). Also, trading of price figures, candlestick patterns, Price Action patterns is popular among traders.

Example:

  • On the daily chart of the USD / CHF pair, during the downtrend, an Inverted Head-Shoulders price reversal pattern has formed.
  • When the price breaks the pattern’s neckline upwards, a buy position is opened.
  • The stop is set beyond the local minimum (the right shoulder of the pattern), the reference point for the Profit is the pattern’s height in points (H).
USD / CHF – trading according to technical analysis

Indicator strategies

In indicator strategies, signals from various trading indicators serve as the basis for making deals. It can be one complex indicator or a trading system of several indicators. Based on indicator signals, you can create automated trading systems – advisors.

Example:

Let’s take for example a simple indicator strategy “Alligator”, described earlier in one of our articles.

  • On the daily chart of the USD / CHF pair, after a small sideways trend, a decline begins, the intertwined lines of the Alligator indicator begin to expand and move down.
  • The Awesome Oscillator indicator begins to decline from the zero line, the bars of the histogram are red.
  • The price breaks the level of the nearest local fractal located below all three lines of the Alligator indicator. A sell position is opened.
  • The stop is placed behind the fractal located above the Alligator indicator lines. Profit can be fixed at the reverse crossing of the Alligator indicator lines.
USD / CHF – trading by indicators

Conclusion

The USD / CHF currency pair is in demand for trading on the Forex market. Due to its liquidity, availability and minimal spread, the pair is popular with traders. You can trade a pair based on fundamental factors, using technical analysis or using indicator strategies.

Novice traders need to practice on a demo account first. Only after receiving a stable positive result, you can switch to a real account. Successful trading will require disciplined adherence to risk management rules.


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