The USDCHF pair is one of the easiest to trade, despite being less popular than most major pairings. It consists of the US dollar, the world’s unofficial reserve currency, and the Swiss franc, the world’s eighth most widely held reserve currency. Furthermore, despite the fact that the majority of the world’s debt is held in USD, Switzerland is a globally recognized epicenter of banking and finance. As a result, traders and investors alike are paying close attention to this pair.
History of USDCHF pair
The Swiss Franc replaced the other currencies in circulation at the time as Switzerland’s sole legal tender in 1850. Switzerland quickly established itself as a global banking refuge, with the CHF’s value remaining among the highest in the world. After decoupling from the gold standard in the 1930s, it only devalued during the Great Depression. It is now considered one of the safe havens, owing to its stability and importance in global finance.
The US dollar became the country’s sole currency in 1792. Unbeknownst to the rest of the world, the United States would go on to become the world’s most powerful superpower. In 1944, the Bretton Woods Conference was convened at the height of World War II, and it tied every other country’s currency to the US dollar as a reserve currency. The USD was then backed by gold, which was valued at $35 per ounce. Nixon, the then POTUS, scrapped the gold standard in 1971 and turned the dollar into the current floating currency.
Trading strategies
1. Watch out for news from the major bodies influencing the pair
Swiss National Bank (SNB)
It is Switzerland’s central bank, and it has the biggest influence on the USDCHF pair. The SNB’s major announcements and policy rate decisions have been attributed to the major price moves of the pair. The SNB also publishes rate decisions every quarter, along with rate statements that outline the bank’s short and long-term monetary policy.
Federal reserve
This is the United States central banking system. It publishes interest rates and a rate statement eight times a year. Given the considerable importance of the USD in the currency market, these dates tend to be highly critical.
US Bureau of Labor Statistics
The USDCHF pair, like most currencies, is data sensitive. The number of people employed is one of the most important factors influencing the value of the US dollar on the global currency market. Forex traders pay close attention to the monthly publication of nonfarm payrolls (NFP) data, which is handled by the US Bureau of Labor Statistics. As a constituent component of the USDCHF pair, changes in the US dollar will affect the exchange rate.
Federal Statistical Office of Switzerland (FSO)
In Switzerland, the FSO Is the official keeper of statistical observations. It collects and disseminates essential statistics on topics such as the economy, population, and environment. Data on significant surveys such as the Business Census, National Consumer Price Index, Swiss Earnings Structure, and Swiss Labor Force should be monitored by USDCHF traders.
2. Trading during European and US sessions
Many institutional and individual traders enjoy a 24-hour forex market since it provides liquidity and the ability to trade at any time of day or night. During European and US trading hours, and especially when major economic statistics are issued, the USDCHF pair is most liquid. To date, London has had the privilege of setting the pace for the European session. London’s official business hours are 7:30 a.m. to 3:30 p.m. GMT. The North American Session, centered in New York, is available from 12 p.m. to 8 p.m. GMT. In this trading session, most trading activity will typically occur in the moments before and after economic reports are released.
3. Price action trading strategy
Bullish and bearish patterns are generated during high volatility periods. Higher time frames, such as the daily or weekly, tend to be more significant than those during low volatility. As such, they should be construed as more relevant. Fake-outs are more common when a breakout happens during lower volatility sessions.
Trendlines and channels aren’t the most dependable tools, especially on USDCHF charts. They’re rarely well-defined. Sloping trendlines, like horizontal support and resistance zones, tend to act as broad zones rather than precise levels. As a result, trendlines and channels on the USDCHF pair should be traded with caution, as their existence does not guarantee that the price will follow them.
Round numbers are also frequently respected, particularly on intraday charts, where this is considerably more apparent. As a result, round numbers can be thought of as support and resistance levels that can reveal crucial information about which technical levels to pay attention to.
4. Correlations
The EURUSD currency pair and the USDCHF currency pair have always had a near-perfect negative correlation. This means that when the EURUSD falls, the USDCHF will tend to rise, and vice versa. Furthermore, the USDCHF currency pair has a negative correlation with gold due to the safe-haven factor. The USDCHF tends to fall when gold prices rise, and vice versa.
The USDCHF is almost perfectly correlated with the Danish krone and the USDJPY. As a result, these currency pairs tend to move in tandem most of the time. These correlations can often lead to good trading opportunities in the USDCHF and should not be overlooked.
Why should you trade the USDCHF?
- It has a lot of liquidity, which is useful in times of economic and political turbulence.
- It is sensitive to geopolitical events, which makes it predictable.
- There’s never a scarcity of information about economic changes that influence the pair.
- It is quite similar to the British pound, another commonly traded currency.
- It may be traded in a variety of ways, including CFDs and options.
Risks associated with trading the pair
- This pair is distinguished for its minimal volatility. This means there isn’t much profit potential in its price movements. As a result, you should not expect significant profits from a single-pair deal.
- Many other countries consider both currencies to be safe havens. As a result, during times of economic uncertainty, it may be difficult to decide which currency to buy and which to sell.
Conclusion
The USDCHF pair is one of the most intriguing pairs to trade. The US dollar is the world’s reserve currency, and it is frequently used to settle debts and complete transactions all around the world. The CHF, on the other hand, is the global banking and financial center’s currency. Major world economic events, as well as local US and Swiss economic developments, have an impact on the USDCHF pair. The price of the pair is also affected by gold prices and interest rates set by the Fed and the SNB. It also has a negative correlation with EURUSD and a positive correlation with the Danish krone and USDJPY.