Trading CHFUSD Currency Pair Secrets
There are around six currency pairs known as majors that get around more than 90% of the global currency transactions. CHFUSD currency pair is a highly popular and lucrative pair that many traders trade. The main reason for this has to do with the reputation of the Swissie (CHF) as it is popularly called. Swissie is considered to be a stable currency that can be relied on in times of financial crisis. Wealthy investors tend to dump USD and move into CHF when there is some financial crisis like what happened in 2008. Get these Forex Scalping Cheatsheets FREE. Discover Forex MegaDroid Robot that made 2,270.30% in 2009 averaging around 101% every month. Learn Fibonacci Retracement and know this highly powerful Fibonacci Strike Method!
The most important expectation is that Switzerland tends to have reliable economic fundamentals. Switzerland is known to have a strong aversion to high inflation. It has a history of current account surplus. Plus it has a sound and well known banking system where the rich and the famous and the bold and the beautiful tend to store their wealth.
Swiss Franc (CHF) is still pegged to the gold. Switzerland has the fourth largest gold reserves in the world. Gold reserves with the Swiss Central Bank (SCB) significantly exceed the CHF currency in circulation. Switzerland has a long history of political neutrality spread over a period of many centuries. What this means is that SCB is independent in making its monetary policy as compared to the European Central Bank (ECB). SCB goal is to not let inflation exceed the 2% target.
With a tight monetary policy, investors expect CHF to be a stable currency that can hold its value over the period of time. Now trading the CHFUSD pair can be highly lucrative. Both EURUSD and USDCHF pairs move in opposite direction. So you can trade both these pair simultaneously to hedge your risk.
Now, a change in a major fundamental factor like some breaking news or some unexpected economic release can cause the EURUSD to move suddenly. This sudden move of EURUSD pair is always accompanied by an equally sharp move by CHFUSD in the opposite direction.
When trading CHFUSD pair, you need to know what is happening to the CHF money supply with the data on CHF M3. M3 is the broadest measure of money supply in the economy. You also need to keep an eye on inflation in the Swiss economy by watching the Swiss CPI. If Swiss CPI increases, SCB is surely going to increase the interest rate to check it. But sometimes, this may not happen and SCB may let inflation soar a little bit so as to achieve its unemployment target. You need to watch both US and the Swiss unemployment data to figure out how the FED and the SCB are going to react againt inflation! After knowing the fundamentals, it is the technical analysis and the charts that you need to use in making your decisions in trading CHFUSD pair. Fundamental analysis is always long term while technical analysis is short term. Technical indicators should be used to confirm a trend or a range in CHFUSD pair. In the end, always trust the charts and trade what they say!
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