USD-CHF Trading

USDCHF is the ticker symbol for the US dollar and Swiss franc exchange rate. Also referred to as the ‘swissie’, as of October 2019, the USDCHF is the fifth most traded currency pair in the forex market. Since the pair includes the US dollar, it is considered one of the forex ‘majors.’ This also means that it has huge daily trading volumes, high liquidity, and offers much tighter spreads than minor and exotic currency pairs. In the USDCHF forex rate, the US dollar is the base currency, while the Swiss franc is the quote currency. This means that at any given time, the price of the USDCHF pair represents the number of Swiss francs it would take to exchange for one unit of the US dollar.

The History of USD CHF Trading pair

The US dollar needs no introduction. In 1792, the US Congress created the US dollar, and it has now become the most widely used currency in the world, both in circulation and reserve. The US dollar is paired with all main currencies in the forex market to form the ‘majors’. Meanwhile, the Swiss franc has had an interesting history and is now considered a safe-haven currency. The currency was first issued in 1850, and between 1865 and the early 1920s, Switzerland was part of the Latin Monetary Union alongside France, Italy and Belgium, whose currencies were all pegged to silver.

The Swiss franc also formed part of the Bretton Woods System that was formulated after World War II but then collapsed in 1974 because of excessive imbalances. The country continued having its currency value pegged to gold until a referendum changed all of this in 2000. CHF earned its safe-haven status because of the sound political and economic management policies in Switzerland. Politically, the country is revered for its neutrality and has, notably, not had an armed confrontation since 1815.

Switzerland has also implemented sound public finance policies, with positive trade balances and absolutely no financial repression. The country has a well-documented history of secrecy, which was even drafted into law in 1934 and the Swiss National Bank has long followed a zero-inflation policy. Combined with the country’s political neutrality, the Swiss franc has stood out as a strong and stable currency. Interestingly, despite being the ‘fiat gold’, the CHF is not a reserve currency. That is, foreign exchange transactions in Switzerland are settled in either euro (EUR) or the US dollar (USD), and not in Swiss francs.

USD-CHF Trading Price History

The Swiss franc displayed its safe-haven qualities during the ‘Great Recession’ of 2007-2009 when it strengthened against all major currencies. In fact, the Swiss franc gained through the crisis and the aftermath, leading to the USDCHF pair posting its lowest ever price of 0.7066 in August 2011. The USDCHF would later drift higher to above parity before a sharp decline in 2015 when the Swiss National Bank removed the Swiss franc floor of 1.2 against the euro. Following that announcement, the USDCHF rate dipped from circa 1.0200 to 0.8300. It would later drift higher, and as of October 2019, it was trading between 1.0300 and 0.9200.

Major Bodies Influencing USD-CHF Pair

• Swiss National Bank
  The Swiss National Bank (SNB) is the Central Bank of Switzerland and has the most influence on the USDCHF pair. Major price movements on the pair have been attributed to key announcements and policy rate decisions of the SNB, such as the 2015 surprise announcement of the removal of the EURCHF peg. The SNB also releases quarterly rate decisions that are accompanied by rate statements detailing the bank’s short- and long-term monetary policies. It is important to track these releases to gain fundamental bias on the direction of the Swiss franc.
• Federal Reserve
  The Fed, as it is commonly known, is the central banking system of the United States. The Fed releases rates and the accompanying rate statement eight times a year. These dates are extremely important, given the significant role of the US dollar (USD) in the forex market.
• US Bureau of Labour Statistics
  Like most currencies, the USDCHF pair is also data sensitive. Employment numbers are some of the biggest catalysts of volatility on the US dollar, and the overall forex market. Particularly, forex traders watch the monthly release of Nonfarm payrolls (NFP) data, and the body responsible for that is the US Bureau of Labour Statistics. As a constituent component of the USDCHF pair, movement in the US dollar will impact the exchange rate.
• Switzerland Federal Statistical Office
  The Federal Statistical Office (FSO) is the national custodian of official statistical observations in Switzerland. It produces and publishes key data on areas of national importance, such as economy, population and environment. USDCHF traders should watch out for data releases on key surveys, such as Business Census, National Consumer Price Index, Swiss Earnings Structure, and Swiss Labour Force.

USD/CHF Trading Correlations

The USDCHF currency pair has always had a near-perfect negative correlation with the EURUSD pair. This means that the USDCHF will tend to rise when the EURUSD falls, and vice versa. In addition, because of the safe-haven factor, the USDCHF currency pair has also had a negative correlation with gold. When gold prices rise, the USDCHF will tend to fall, and vice versa.

USD-CHF FAQ

• Why is the USD/CHF pairing so popular in forex markets?

  Even though the Swiss franc might not be as popular by itself as the U.S. dollar, it does act as one of the world’s top safe haven currencies, and because of that the USD/CHF pairing is one of the more popular pairs in forex trading. Because of Switzerland’s neutral stance on political events, and its discreet banking system, the Swiss franc is highly coveted during times of uncertainty and turmoil, and that makes this pair the sixth most traded pair on average even though there is little need for the Swiss in terms of trade in the global markets.

   
• Are there any notable correlations in the USD/CHF pairing?

  There are several notable correlations in fact. The USD/CHF is almost perfectly correlated with the Danish krone and is nearly perfectly correlated with the USD/JPY. That means these currency pairs move pretty much in tandem most of the time. The pair is also nearly perfectly negatively correlated with the EUR/USD pair, meaning when the EUR/USD rises the USD/CHF falls, and vice versa. These correlations can lead to good trading opportunities in the USD/CHF from time to time and should not be ignored.

   
• What are some good trading strategies for the USD/CHF?

  Because of the safe haven status of the Swiss franc trading around important U.S. economic releases has become a favoured strategy for some traders. The important economic releases can easily cause volatility and a flight to safety when they are worse than expected by market participants. Conversely, they can also cause an uptick in risk appetite, which is usually beneficial to the USD, and will cause this pair to rise. Because of the almost perfect negative correlation between the euro and the franc any economic releases from the European Union can also be used to trade the USD/CHF successfully.