The Complete Guide to Trading USD/CHF
Whenever you see the USD/CHF abbreviation in your forex trading account, you are viewing one of the most stable and important currency pairs in action.
Known among forex traders as the “Swissie”, the USD/CHF currency pair describes the current exchange rate between the US dollar and the Swiss franc.
More specifically, USD/CHF indicates how many Swiss francs it costs to purchase a single US dollar on the global marketplace. For example, if USD/CHF is trading at 0.92, then it costs 0.92 francs to buy one dollar.
The US dollar, as the world’s de facto global reserve currency and the currency in which the majority of foreign debt is held, is a central currency in virtually every aspect of foreign exchange trading.
Meanwhile, the Swiss franc is the world’s 8th most widely held reserve currency and the official currency of one of the most important global epicenters of banking and finance.
It always has the attention of seasoned traders. When trading USD/CHF, there is never a dull moment. Read on to find out everything you need to know about USD/CHF forex trading.
- Symbol for USD: $
- Symbol for CHF: CHF
Live Chart USD/CHF
What is USD/CHF forex trading?
What does it mean to trade the USD/CHF currency pair on the global marketplace? Why is it such a popular trading choice for many forex traders? Find out in this section.
If you are new to forex trading, it is worth briefly breaking down exactly what this immensely important and popular form of financial trading is.
Forex trading is the buying and selling of different currency pairs with the intention of profiting from daily and hourly price shifts in the value of that pair.
It means buying one currency while simultaneously selling another, in the hope of profiting either from a price rise in the base currency or a price fall (known as “shorting”) in the other.
As mentioned, USD/CHF refers to the number of Swiss francs required to purchase a single US dollar at the current market price. Both the US dollar and the Swiss franc are floating currencies, meaning that their value is pegged to nothing other than pure market conditions and sentiment.
The price of this currency pair will often fluctuate many times throughout the day, experiencing incremental peaks and troughs.
As a day trader, which is the most common forex trading strategy, your goal would be to buy and sell at opportunistic times based on the direction that you think the market will travel toward.
For example, if you think the value of the Swiss franc is going to fall relative to the US dollar, you would want to sell your francs before this change occurs.
Profiting from accumulating shifts in currency pair exchange rates is the key to successful forex trading.
History of the USD/CHF forex pair
In this section, you will learn more about the colourful history of the dollar and Swiss franc, as well as the key benefits of USD/CHF forex trading on the global market.
Created via an act of Congress all the way back in 1792, the dollar was established as the sole currency of what would later become the world’s pre-eminent economic superpower.
Following World War II and the establishment of the Bretton Woods system, the dollar (also called the “greenback” by traders), has its position as the world’s reserve currency cemented into place.
Although this system collapsed in 1973, the US dollar has remained the world’s pre-eminent currency. When the dollar rises and falls, the fate and fortunes of entire nations go with it.
The Swiss franc as we know it today was first produced as legal tender back in 1850, as the culmination of a decades-long effort to bring some 800-plus currencies circulating in Switzerland under one fiat.
This coincided with Switzerland’s rise as the world’s banking haven, which has helped to keep the value of the Swiss franc as one of the highest on the planet.
The only time the franc suffered a significant devaluation was in the midst of the Great Depression of the 1930s, when its decoupling from the Gold Standard led to a brief contraction.
Today, the franc is widely considered to be one of the planet’s premier “safe haven” currencies due to its stability and importance in global finance, much like the US dollar.
Trading the “Swissie” is immensely popular among seasoned forex traders for a number of reasons:
- High liquidity, especially in times of economic crisis.
- Highly sensitive to major geopolitical developments, lending it a sense of predictability.
- The huge number of resources where you can learn about the latest developments in USD/CHF.
- Similarity to the GBP, another hugely important and widely traded currency.
- Diverse trading vehicles with which you can speculate on USD/CHF, including options and CFDs.
Factors that influence USD/CHF
Read this section to learn more about the key factors that influence price movements in the USD/CHF currency pair.
Owing to the prominence and popularity of both currencies, there is a huge amount of liquidity within the USD/CHF pairs. This means that you are pretty much guaranteed to be able to buy and sell dollars and francs whenever you want for the exact price that is listed on the ticker.
One of the reasons why USD/CHF forex trading is so popular is the predictability of the pair, due to the sensitivity it displays to various economic events.
One of the main policies that affect the value of USD/CHF is domestic monetary policy – namely, any policies concerning debt, interest rates, quantitative easing, and deflating from either the US Fed or the Swiss National Bank (SNB).
In addition, any events affecting the market outlook for the EU, in whose economy Switzerland is deeply embedded, will always affect the CHF.
In addition, any global economic uncertainty typically translates to a rise in USD/CHF, as investors tend to park their money in the safe haven of Swiss banks. Interestingly, the reverse can be true whenever the price of gold rises. Typically, when the price of gold rises, the value of CHF relative to the dollar tends to decline.
CHF also correlates with EUR/USD. If EUR/USD tends to weaken, traders flood into USD/CHF, causing the latter’s value to rise.
The role of the USD
Do you want to learn more about the key role of the US dollar in the global economy? What about some of the top factors that affect its value relative to other currencies? Read on.
As mentioned, the USD is the world’s de facto reserve currency, comprising 60% of all foreign currency reserves. In addition, the US holds more gold than any other country in the world, has the world’s largest economy and largest nominal GDP, the world’s largest defense budget, and the world’s largest financial sector.
More specifically, the currencies of dozens of other nations are pegged directly to the US dollar, while the majority of all international transactions and debt are settled in dollars.
The dollar is also known as the world’s pre-eminent “safe haven” currency. This means that, whenever there is a significant global downturn or a crisis of confidence in the economy, investors flood into the dollar as a secure asset, pushing its value up against most other currencies.
Anything that happens to the US dollar matters for the rest of the world.
The role of the CHF
Below, you can find a summary of the role of the Swiss franc in the world economy today, as well as its importance to global forex markets.
The CHF is the currency of the world’s most famous banking centre. A full third of the world’s privately held wealth is held in Swiss Banks, which has helped to buttress the value of the Swiss franc to make it one of the world’s most valuable currencies.
This, of course, also means that exports from Switzerland are very expensive, which is why the Swiss National Bank currently imposes one of the lowest national interest rates in the world, at -0.75%.
As the world’s elite banking epicenter, the Swiss economy is just as globalized, if not more so, than that of the US. As such, the CHF is just as vulnerable to major shifts in the global economy as the US dollar, which is what makes this such a predictable and enjoyable pair to trade.
When to buy or sell USD/CHF
Here we tell you more about the best times when to buy and sell USD/CHF.
Let’s walk through some examples to illustrate this.
Remember, USD/CHF is impacted by all major global economic developments, as well as by the domestic US and Swiss policy, gold prices, interest rates, and currency pairs that correlate with USD/CHF, such as USD/GBP or USD/EUR.
In our examples, let’s assume USD is the base currency.
If you believe that the SNB is about to raise interest rates, potentially harming Swiss trade, then you could hit BUY on USD/CHF, as the indication here is that USD will rise in value against CHF.
Alternatively, if you believe that upcoming US employment data is going to be bleaker than expected, you should hit SELL, as it would seem that the USD is going to fall in value against the CHF.
How to trade USD/CHF
Read this section to learn more about how exactly you can start trading USD/CHF today.
USD/CHF is one of the world’s most popular currency pairs to trade and there is a very strong and consistent global demand for both currencies. As such, there is significant liquidity available when trading USD/CHF, meaning that you can pretty much trade in real-time without any need to wait.
To begin trading USD/CHF, you will want to open up a forex trading account with a trusted brokerage platform that offers direct trading, CFDs, options, futures, and any other financial products you might be interested in.
The broker will then be able to take your deposit and use it to hold your position on USD/CHF, allowing you to buy and sell in real-time according to the market information you have. Simple.
Profit with USD/CHF
This section acts as a guide to some of the ways that traders can make a profit when trading USD/CHF.
USD/CHF is extremely sensitive to global risk and this should guide your trading decisions. You should also learn which currencies the CHF is strongly correlated with (GBP and EUR) and other factors that influence this pair (e.g. gold prices).
Given the huge stability of both currencies, USD/CHF is not particularly volatile. Therefore, you should not expect to make significant profits from single, large transactions.
Rather, you should use the data to execute a large number of buy and sell orders in a single trading day. It is possible to profit from small, incremental shifts in price in order to accumulate significant winnings.
Close your position to take a profit or cut a loss
When trading USD/CHF, you’ll need to know when to close your position. This section provides details on that.
As with any forex trade, you will need to close your position at some point, whether that is to pocket your profits or limit your losses.
Whichever it is, remember that it is always best to open and close a position within a very narrow time frame (usually a single day), as this sluggish currency pair will not yield profits from a long position.
It is also crucial to keep your eye on the ball and know when to close your position to stem losses. With day trading, your profits are based on small, incremental gains.
A single significant downward shift can easily wipe out an entire day’s worth of gains. That’s why you should always have a stop-loss in place to immediately close a position once losses reach a certain point.
Choose a broker & open an account
In this chapter, you can read about the importance of choosing the right forex broker and how you can open your trading account today.
When trading or speculating on currency pairs on the global market, you need a qualified, licensed, and trustworthy forex broker to execute the actual trades on your behalf.
Forex trading is a complex, multi-trillion-pound industry. You need a brokerage platform that can provide you with direct market access and complete the nitty-gritty on your behalf. In order to find the right broker for your forex trading needs, you can view the US’s top brokerage platforms right here.
USD/CHF trading risks
Of course, there are risks that come with USD/CHF forex trading. Learn about some of these below:
Lack of volatility: USD/CHF is simply not particularly volatile, meaning it can be difficult to make money when the pair is particularly inactive.
The “safe haven” dilemma: the USD and the CHF are both safe-haven currencies, meaning that it is hard to figure out which one to buy in times of global turmoil.
Risk of leverage: leverage offered by brokers allows you to borrow capital to increase the size of your position. While this can increase potential profits, it can also seriously maximize losses.
USD/CHF is a currency pair that represents so much of what investors love: stability, power, wealth, and trustworthiness. This is also what can make the pair such an interesting one to trade on the global market.
While there is not a whole lot of volatility with this pair, there are many opportunities to trade and speculate on USD/CHF, some of which can and have led to substantial success for traders worldwide