The USD/CHF currency pair, comprising the US dollar and the Swiss franc, offers traders exposure to two of the most stable and liquid economies in the global financial system. As one of the major currency pairs, USD/CHF sees heavy institutional participation and typically exhibits tighter spreads than many minor and exotic pairs.
Given its relevance as a barometer for risk sentiment, USD/CHF responds noticeably to geopolitical events and central bank policy shifts. This makes it a highly useful pair for expressing broader views on global risk appetites, interest rates, and liquidity conditions.
In this article, we will explore everything you need to know to start trading USD/CHF like a pro. We’ll cover fundamental and technical analysis techniques, key catalysts influencing price action, and optimal strategy selection.
What Are The Key Characteristics of USD/CHF
What Drives USD/CHF Valuation?
The USD/CHF exchange rate primarily reflects the relative strength or weakness of the US dollar versus the Swiss franc. The Swiss National Bank (SNB) actively manages the Swiss franc’s value against the euro through a policy of currency intervention and negative interest rates.
As a result, global risk sentiment, interest rate differentials, and dollar liquidity flows tend to exert an outsized influence on USD/CHF price action. Some of the key determinants include:
- Risk appetite: The franc acts as a haven, gaining strength in times of geopolitical/economic uncertainty. Improving risk conditions boosts demand for higher-yielding assets like stocks.
- Interest rate differentials: Higher US rates versus Switzerland strengthen the USD and weaken the CHF. The SNB maintains rates below 0% to curb franc demand as a funding currency.
- US economic data: Better/worse than expected numbers impact Fed rate hike (or cut) expectations, tilting USD strength one way or the other.
- Dollar liquidity: Sudden USD supply/demand imbalances move the dollar across currencies like CHF used for funding/carry trades.
- Geopolitics: Events like trade wars, election outcomes, or crises alter risk appetites globally and regionally.
Trading Hours and Liquidity
As one of the world’s most liquid currency pairs, USD/CHF enjoys near 24-hour traceability with tight spreads. Official trading hours are:
– Tokyo session: 23:00-6:00 GMT
– London session: 8:00-16:00 GMT
– New York session: 13:00-22:00 GMT
Liquidity remains strong throughout the Asian and European overlap sessions but sees higher volatility during active London/New York hours. Weekends naturally witness lower activity.
Typical Price Ranges
Daily ranges for USD/CHF commonly extend 50-80 pips but regularly surpass 100 pips during major event risk or high volatility periods. During low liquidity Asian sessions, 30-50 pip intraday swings are more ordinary. Tighter spreads of 1-3 pips reflect considerable two-way liquidity.
Piping and Lot Sizing
As a major currency pair, each pip movement in USD/CHF equates to $/€/¥0.0001 in value. Standard lot sizes are 100,000 units of the base currency (USD) per mini lot, providing a more manageable risk profile than standard lots on other pairs.
Fundamental Analysis of USD/CHF
Traders of USD/CHF must follow relevant macroeconomic indicators and policy moves to shape market conditions. Let’s examine the key fundamentals to watch.
US Data
Non-farm payrolls, CPI, retail sales, manufacturing PMI, durable goods orders, and other reports provide clues about the domestic economy’s strength. Better data signals potential Fed tightening, lifting the dollar including versus CHF.
Swiss Data
The SNB tightly controls inflation and economic growth in Switzerland. GDP, unemployment, and CPI prints offer insight into franc value drivers like interest rates and currency intervention policy.
US Interest Rates
Fed meeting decisions and guidance, along with hints from officials on the rate path, strongly influence USD performance. Traders closely watch every word from Powell.
Swiss Interest Rates
The SNB maintains rates underwater to prevent Swiss franc appreciation, capping the currency’s haven demand. Any signals of future tightening weigh on CHF.
Geopolitical News
Events posing risks to markets like trade tensions or unrest boost haven flows into CHF. Major global crises drive demand for dollars as the world’s reserve currency.
Central Bank Comments
Verbal intervention from the Fed, ECB, and SNB can move markets independently of data at times. Comments shape outlook and policy expectations considerably.
Political Risks
Elections, impeachment proceedings, and other national or international uncertainties roil markets, altering risk appetite globally and regionally.
By monitoring this intelligence, traders gain insight into medium-term USD/CHF price direction ahead of broader market moves. Fundamental analysis forms an essential piece of the informational edge.
Technical Analysis of USD/CHF
For day-to-day and intraday trading decisions, technical tools provide the framework. Here are some favored techniques:
Chart Patterns
Looking for symmetrical triangles, flags, and head-and-shoulders patterns to identify areas of interest for entries/exits. Patterns on lower timeframes signal near-term moves.
Moving Averages
The 10, 20, 50, and 200 period simple/exponential moving averages are common indicators of trend direction and strength. Crossovers generate buy/sell signals.
Trendlines and Channels
Drawing support/resistance trendlines off swing highs and lows, plus upward/downward sloping channels, visualize levels to trade within.
Candlestick Formations
Recognizing bullish/bearish candlestick patterns like a hammer, hanging man, and doji stars predict short-term momentum transitions.
Oscillators
The RSI and MACD signaling overbought/oversold conditions and crossovers to capitalize on momentum shifts.
By carefully considering what these techniques convey on various timeframes, traders obtain a more holistic technical view for spotting high-probability set-ups.
The Top Trading Strategies for USD/CHF
Armed with fundamental perspective and technical proficiency, here are some primary strategy approaches:
Day Trading USD/CHF
Entering and exiting intraday based on technical clues like price action signals, and indicator divergences/breakouts during active London/NY sessions. Target 5-20 pips per trade.
Swing Trading USD/CHF
Holding positions for 1-5 days centered around major data/event risk, looking for 50-150 pip moves per trade. Employing trend-following and breakout techniques.
Scalping USD/CHF
I am taking many small 5-10 pip profits per day using order flow analysis, news trading, and market depth cues on very short timeframes like the 1-minute chart.
Carry Trade with USD/CHF
Borrowing low-yield CHF to purchase higher-yielding USD on dips, benefitting from the interest rate differential and capitalizing on a potential continuation in the USD uptrend.
Hedging
Shorting or going long USD/CHF to offset directional exposure already held in correlated assets like USD/JPY, limiting portfolio risks around key events.
The right approach depends on individual trader preferences and available schedules. Experiment with different styles to uncover personal strengths.
