WHAT IS EUR/CHF FOREX TRADING?
The EUR/CHF currency pair is one of the most popular ‘cross-currency’ pairs. This means that the pair sees both currencies traded directly for one another instead of being converted first into a base currency like the US dollar.
It is said that the EUR/CHF currency pair bears a significant resemblance to the USD/CHF currency pair, known colloquially in the industry as the ‘Dollar Swissy’.
Contrary to popular belief, Switzerland is not a member state of the European Union (EU).
This means that the Swiss National Bank determines Switzerland’s own interest rates, independent of the European Central Bank (ECB). Nevertheless, the EU and Switzerland are closely linked both geographically and as long-time trading partners.
Live chart EUR/CHF
If you want to quickly ascertain uptrends and downtrends or the general momentum in the EUR/CHF forex trading pair, it’s best to use the live trading charts available to you.
These charts are widely available with the leading forex brokers. Many of whom are compatible with state-of-the-art trading software like MetaTrader 4 and 5, allowing you to use MetaTrader’s own real-time graphs and charts to plot the course of EUR/CHF over multiple timeframes – from as little as the last minute to the last year.
Live charts are most beneficial for forex traders that rely heavily on technical analysis to open positions in the EUR/CHF market. When the line graph is trending upwards, the value of the Swiss Franc is rising against the Euro.
Technical forex traders will use trading software or proprietary trading software to establish support and resistance points where the chart moves significantly for or against the Swiss Franc. This is a concept known as range trading.
History of EUR/CHF
The Swiss Franc carries significantly more heritage than the Euro. The Franc is the national currency and legal tender of both Switzerland and Liechtenstein. Roots of the Franc have been found dating back as far as the Helvetic Republic in the late 18th century.
Since 1850, the Swiss Confederation has issued Swiss Francs and since then it has been deemed a ‘safe haven’ currency, with at least 40% of its currency needing to be underpinned by gold reserves.
The EUR/CHF forex trading pair was not established until the launch of the Euro as the single currency for member states of the EU wishing to be part of the Eurozone.
The Euro was first launched on 1 January 1999 but was strictly a digital currency for the first three years until banknotes and coins entered circulation on 1 January 2002.
Factors that influence EUR/CHF
The primary drivers of the EUR/CHF forex pair are economic and geopolitical conditions. From an economic perspective, the Euro’s interest rates are driven by the European Central Bank (ECB) and the Swiss Franc’s interest rates are determined by the Swiss National Bank.
Economic uncertainty within the EU can cause the Swiss Franc to rise in value against the Euro and vice versa.
Similarly, political uncertainty within the EU can also see investors head to the Swiss Franc. It’s something that’s happened on many occasions in recent years, with the sovereign debt crisis in Greece and the recent Brexit negotiations.
Role of the Euro
Within the EUR/CHF currency pair, the strength of the Euro is determined by the ECB. The ECB publishes reports every month regarding the economic wellbeing of the Eurozone.
This fundamental analysis is powerful for forex traders, which can influence the short-term value of the Euro against independent fiat currencies like the Swiss Franc.
There are additional drivers for the Euro in the EUR/CHF forex pair, including unemployment data in the Eurozone and trade data regarding imports and exports.
Political instability such as shock election results in influential EU member states can also upset the Euro’s equilibrium.
Role of the Swiss Franc
Although the Swiss Franc has a relatively small influence on the global or even continental economy, its stringent measures regarding fiscal security and privacy maintain significant strength in the Franc.
Given Switzerland has long been seen as a political neutral nation, its public finances are influenced largely by its own socioeconomic affairs.
Data regarding Switzerland’s GDP, inflation rates, retail figures, trade balances, unemployment figures and industrial output is all readily available online, which can help influence upward and downward pressure on the EUR/CHF market.
Strategies on forex trading EUR/CHF
Many forex traders consider the EUR/CHF as a proxy currency pair, hedging against other open positions in the forex markets. When other forex markets are demonstrating rising risk appetite, the value of CHF tends to fall faster against the Euro. When other forex markets become more risk-averse, the value of CHF tends to rise quicker against the Euro.
Price action on the EUR/CHF forex trading pair is typically smaller than most other minor and major forex pairs, with trends often more gradual and less volatile than other forex markets.
It’s possible to place long and short-term positions on the EUR/CHF. Long-term strategies may revolve around entry points approaching rising support trendlines on the live charts.
Short-term strategies may require scalping breakouts beneath key support areas, suggesting a shift towards a bearish downward trend.
When to buy or sell EUR/CHF
When you go long (buy) the EUR/CHF, you are hoping that the value of the Swiss Franc rises against the Euro. When you short (sell) the EUR/CHF, you believe the value of the Swiss Franc will decline against the Euro.
One of the main reasons that the CHF will fall against the Euro is a strengthening US dollar. Whenever the Eurozone looks likely to experience volatility or uncertainty, the relative safe haven of the CHF will rise against the EUR.
How to trade EUR/CHF
If you like the idea of incorporating the EUR/CHF currency pair into your forex trading portfolio, it’s a good idea to check out any of the forex brokers listed and reviewed right here at FxForex.com.
Many of these brokers offer contracts for difference (CFD) trading and spread betting. The former is most popular as it allows you to short (sell) the price of forex pairs like the EUR/CHF and profit from dips in the value as well as uptrends.
It’s important to understand the dynamics of a forex market and how it enables you to profit from opening a trade on EUR/CHF. If you wish to profit from a long (buy) position on EUR/CHF, your closing position must be higher than the price of your opening position. If you wish to profit from a short (sell) position on EUR/CHF, your closing position must be lower than the price of your opening position.
The difference between your opening and closing position is your profit, multiplied by the number of units invested in the market.
Close your position to take a profit or cut a loss
Whichever forex broker you choose from our list of rated and reputable sites, you can be sure of being able to quickly and simply close open positions in the EUR/CHF market. Some brokers are compatible with high-end trading software like MetaTrader 4 and 5. Meanwhile, others have developed their own proprietary trading software for clients like you to get greater oversight and control of your EUR/CHF trades, using stop losses and take profit orders to mitigate market risks.
Choose a broker & open an account
At FxForex.com, our passion is to introduce new investors and traders to the forex markets and help you select the best forex brokers and trading tools to help you profit from your investments. Using our stringent review criteria, take some time to browse through our broker reviews to help you find the right operator for your needs. This could be based on minimum deposits, spread sizes, leverage and the availability of demo trading accounts.
There are several risks to consider before opening your first EUR/CHF forex trade:
Failure to utilise risk management tools like take profit orders and stop losses can leave your position at risk to market volatility
Failure to monitor the fundamentals of Swiss, European and American economies could lead to significant losses on the EUR/CHF pair
Choosing a forex broker that offers dangerously high leverage on the EUR/CHF currency pair, which can see losses accelerate fast among inexperienced forex traders
In summary, the EUR/CHF is one of the most popular minor forex pairs to trade given its relative stability. The Swiss Franc is one of the few genuine safe haven fiat currencies around the world to shield your trading bank from unprecedented geopolitical and socioeconomic shocks.