Get the Best USD/CHF Forex Trading Strategies & TipsUSDCHF
In the Forex market, when we look at the major currency pairs, we always find the U.S Dollar being the common currency paired with another notable currency. The USD/CHF pair reflects the relationship of the United States Dollar with Swiss Franc, which is the official currency of Switzerland. In the USD/CHF pair, the U.S Dollar is the base currency, while Swiss Franc is the quote currency.
Almost all the currencies in the Forex market are abbreviated or coded according to the name of the currency, such as USD for U.S Dollar and GBP for Great Britain Pound, but the Swiss Franc is denoted by CHF. The Swiss Franc is coded ‘CHF,’ which is the Latin name of Switzerland that is ‘Confoederatio Helvetica’ and F stands for ‘Franc.’
The USD/CHF pair is known in the Forex market by the name of ‘Swissie’ or ‘Swissy’ and shows how many Francs are needed to buy one U.S Dollar. If, for example, the current exchange rate of USD/CHF is 0.95, it means that a trader would pay 0.95 Francs to buy 1 U.S Dollar. The USD/CHF pair is one of the ten major currency pairs and provides ample opportunities for traders and investors to have the possibility to potentially profit. When there is volatility and high risk in the market, traders bid for Swiss Francs as Switzerland is usually politically stable and financially strong as compared to other currencies and economies.
History of USD/CHF Currency Pair
Switzerland has always been a center of banking activities and entertains clients and customers from all over the world. Switzerland has been a favourite among people for storing cash due to its excellent banking systems and providing complete confidentiality to the customers. Being a global hub of storing cash has given considerable strength to the Swiss Francs.
During the European Debt crisis, there were so many massive inflows in Swiss Francs from traders and investors that the Swiss National Bank (SNB) had to benchmark the CHF against the Euro (EUR), and 1.2 CHF was equal to 1 EUR. Apart from Swiss Franc, the Japanese Yen is also considered a ‘safe haven’ currency in times of high volatility or global economic crisis.
The U.S Dollar was introduced as the country’s currency by the U.S Congress in 1792 and considered as the world’s reserve currency due to its dominance and sustainable value. The Swiss Franc is also an ancient currency and was introduced in 1850 as a principal monetary currency as there was a large number of coins in circulation and also different foreign currencies. According to historical facts, there is zero inflation in CHF, as almost 40% of the currency is backed with gold reserves.
The Swiss Franc increased in value against all the other major currencies except the Yen during the Great Recession in early 2000. From the beginning of 2007 to the middle of 2008, the USD fell in value against the CHF, but in late 2008, the USD regained its value due to massive inflows from the investors. But, the USD again fell against the CHF after 2009, and the USD/CHF pair reached a low of 0.7066. The value of USD again appreciated, and the USD/CHF pair traded from values 0.83 to 1.034 from 2012 to 2019.
Both the U.S and Switzerland enjoy mutual trade agreements that are quite large in volume, and on average more than $50 Billion worth of goods and services are traded between the two countries. Switzerland provides complete banking secrecy and privacy through its laws, which is the reason why global investors have opened their accounts in banks of Switzerland. According to statistics, one-third of the world’s private wealth is held in banks located in Switzerland.
How to Trade USD/CHF Pair
The USD/CHF currency pair is a popular trading pair in the Forex market and also contributes to a significant portion of the daily volume of transactions. The USD/CHF pair is preferred by both traders and investors. The USD/CHF is traded 24/7 for five days a week, but the best time for trading is when the market is most volatile which is usually from 8:00 A.M to 5:00 P.M, U.K. time.
Among other options you can trade the USD/CHF pair either through a Forex contract or through Contract for Differences (CFDs), where you can speculate on the price movement of the underlying asset. With CFDs, you can use leverage where with a small initial deposit in your account, you can open a larger trading position. If you think that the USD will rise in value, then you would take a long position or Buy, and similarly, if you think that the USD will weaken in the coming days, then your take a short position or Sell. Trading with CFDs allows you the possibility to maximize the profits, but there is also an equal chance of considerable losses, so you may consider to implement a risk management strategy.
How to read the Price Change in USD/CHF Pair
The USD/CHF pair is negatively correlated with all the other currencies where USD is the quote currency such as GBP/USD, and EUR/USD and also the fact that Franc, Euro, and Pound share a positive correlation. When the USD/CHF exchange rate is at 0.90, but the rates move up to 1.05, then it means that the USD has risen in value in comparison to CHF, and a trader would need more CHF to buy 1 USD.
Similarly, if the rate of USD/CHF pair falls from 1.05 to 0.99, then it would require a trader fewer CHF to buy one USD. The traders mostly use a 1-hour price chart to view the historical value of the USD/CHF pair and speculate on the price movements. If we look at the price chart of the USD/CHF pair, we see a considerable low March 9, 2020, with a value of 0.9250. Then there was a sudden upward trend, and the USD/CHF pair reached a value of 0.9863 on March 19, 2020. From March till now, there have been many swings, and currently, the USD/CHF exchange rate is 0.9512. The Bid price to buy USD is 0.9514, while the Asked price to sell USD IS 0.9513.
What causes price change in USD/CHF pair?
The USD/CHF pair is affected by different factors that not only impact the USD and CHF in relation to each other but also when compared with other currencies. The Gross Domestic Product (GDP) and employment rate are two of the macro-economic factors that have a tremendous effect on the USD/CHF pair.
One of the most crucial factors that impacts the exchange rate of USD/CHF pair is the interest rate differential, which is determined by Swiss National Bank (SNB) in Switzerland and U.S Federal Reserve Bank or Fed in the United States. The price movements of the USD/CHF is attributed to the policies and announcements made by the Fed and SNB.
When the Fed gets involved in the open market trading to make the U.S Dollar strong, then the value of the USD/CHF pair could increase due to a strong value of USD as compared to CHF. On the contrary, if the SNB increases the interest rates, then it would attract the investors, which will then increase the value of Francs, and the USD/CHF pair would decline as it would require fewer Francs to buy 1 Dollar.
The decision to stay neutral on most international political events and sound economic policies has ensured that the Swiss Franc retain its global value and presence among other major currencies. The exchange rate of USD/CHF pair sees sudden volatility due to news releases and reports, which includes the Non-Farm Payrolls (NFP) along with National Consumer Price Index, Swiss Labor Force, Business Census, and Swiss Earnings Structure. The traders need to perform technical analysis and evaluate the price charts and market trends to try to take advantage of volatility, volume, and liquidity that the USD/CHF pair offers.
The information above is for education purposes only and cannot be considered as investment advice. Past performance is not reliable indicator of future results.
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