CHF Trading Tips – How to Trade the Swiss Franc

To start trading one of the most prominent safe-haven currencies, Swissy, using CHF trading tips, let’s consider several important indicators. These are the news of the economic policies from the countries of pairs involved.

For the United States, we already know that the American Federal Reserve and Central Bank are in charge of this policy.

But for Switzerland, it is the Swiss National Bank or SNB that is in charge. The latter often carries out operations on the foreign exchange market to control the price of its currency. It’s suitable for all investors, from Forex to commodity market traders.

Before we tackle trading strategy and indicators, our CHF trading tips start with a small analysis.

The analysis to base your decisions on

To illustrate good trading, we start with the EUR/CHF pair. EUR/CHF prices can also impact USD/CHF prices. It’s because there is a positive correlation between these two pairs.

Perhaps one of the peculiarities of the USD/CHF currency pair is its heavy reliance on the economic situation. Generally, we observe a decrease in this pair when growth is significant and an increase in this parity in times of crisis.

We can explain this phenomenon because the Swiss Franc tends to play the role of a safe haven. This mostly occurs when other economies lose points, or when people are at risk of losing money rapidly due to economic turmoil. It compensates for the high risk of losing in other assets’ value.

This claim has long been verified historically and can be explained by the importance of the Swiss Franc internationally. We have thus seen a strong appreciation of this currency during the last major economic crises.

The Swiss economy is indeed one of the most flourishing today. The country miraculously seems to escape the global crisis. This is in particular thanks to the strong gold reserves held by the Swiss banking system.

The Swissy, therefore, tends to reassure those more prone to forex trade. But the fact that Switzerland is considered a tax haven also tends to reassure investors about the long-term value of its currency. Some economists even argue that Switzerland is, according to their studies, the only country in the world to really deserve its triple-A.

However, the analysis of this currency pair remains reserved for the most seasoned traders. Still, it can allow them complex strategies due to the strength and importance of its movements upwards and downwards.

USD/CHF currency pair history

The currency pair was first known in 1850 when the Swiss franc was introduced to the market. Since that time, USD/CHF had become the sixth most traded currency pair in the world. In its early days, it was primarily used to ensure stable trade between Switzerland and the United States.

From now on, the investments of the USA in the direction of Switzerland represent nearly 130 billion dollars which makes the United States the first country to invest in Switzerland, and that, of course, also contributed to increasing the notoriety of this cross.

Switzerland is also the second-largest trading partner of the United States, just behind Germany.

But it was above all the Great Depression that made the Swiss franc the safe haven we know today. Indeed, during this period, the Swiss currency appreciated against all the others except the Yen to such an extent that the SNB had to intervene in the Forex market to stop its flight to halve the appreciation of this currency against the euro, but this approach finally failed in 2014 with a rise of the Swiss franc of nearly 25% in just a few minutes.

According to the history of the USD/CHF, the decisions and actions of the SNB play a major role in how traders approach this cross. We must therefore follow this indicator.

To be always up to date, always rely on technical analysis indicators appropriate for this type of foreign currency asset.

Trading USD/CHF

Fun fact regarding CHF trading tips: the USD/CHF accounts for almost 4% of total annual transactions in the forex market, making it the fifth most traded currency pair in the world.

Its historical volatility is rather high, with 130 pips maximum since its first listing.

The USD/CHF is trendy, which basically means that its movements, whether bullish or bearish, are both strong and long. It is therefore ideal for the swing trading method.

In addition, the Swiss Franc is a safe haven, which greatly influences the prices of this cross during a period of recession in the financial markets.

Why trading USD/CHF

We now invite you to find out what are the real advantages of the USD/CHF currency pair as a trading asset. Indeed, this currency pair deserves all your attention because it has many advantages.

First of all, despite being a little less volatile than some other currency pairs and notably less liquid than the Euro or the Pound Sterling, the USD/CHF pair is quite frequently traded on liquidity. This currency pair is subject to certain data. It may include political and economic instability, especially during an international crisis since investors appreciate the safe haven representing the Swiss Franc.

You can also use the data on the British Pound to trade the USD/CHF currency pair since the similarities in terms of price and technical properties are numerous here. You can use this British currency to analyze the price of USD/CHF.

There are also many assets with which you can invest in this currency pair. These include online Forex, of course, but also ETFs, futures, and options.

Another strength of this currency pair is that the flow of information about these two currencies is almost continuous. This means that economic data from Switzerland or the United States are plentiful. Therefore, it is quite easy to do a consistent fundamental analysis of this asset.

CHF trading tips – Don’t forget correlated currencies

When it comes to CHF trading tips, you need to know the currencies correlated with the Swissy.

Pairs that usually tend in the same direction are correlated positively as USD/CHF. We find in particular the GBP/USD, AUD/USD, and EUR to CHF/USD crosses.

Similarly, we find negative correlations of the USD/CHF currency pair with other crosses. This currency pair will generally move in the opposite direction to the USD/CHF crosses, JPY, or USD/CAD. Indeed, here the US dollar is the base currency. We can also see a strong negative correlation between USD/CHF and EUR/USD.

It is therefore advisable to take a long position in USD/CHF when the price of EUR/USD is falling and vice versa. Finally, the last negative correlation is the GBP/USD. This is because of the positive correlation between the Swiss franc, the pound sterling, and the euro.

The use of correlations between different currency pairs is particularly interesting when you are carrying out a day trading strategy. They allow you to anticipate rapid developments in the short term.