What is EUR/CHF?
EUR/CHF is the currency pair that shows the value of the Euro against the Swiss Franc. The left side of the pair is called the base currency, in this case the EUR, and the right side is called the quote currency, in this case the CHF. This exchange rate tells you how many Swiss Francs you need to buy one Euro. For example, if the EUR/CHF pair is trading at 0.9800, it means that you need 0.98 Swiss Francs to buy one Euro. So, when the pair is going up in price, the Euro is said to be appreciating or getting stronger and the Swiss Franc is depreciating or getting weaker, and vice versa when the pair is going down in price.
What are the most important EUR/CHF charts for traders to follow?
There are different ways you can display the exchange rate price movements on a chart. The most common ways include a line chart or a bar chart, but the most popular and used one is the candlestick chart. The candlestick chart shows you instantly and in real time where the price has opened, closed and how much up and down it went on any given timeframe.
Let’s say you want to check EUR/CHF price on a daily timeframe. You go to your charting software, select the timeframe and select the candlestick chart (if it’s not set by default). This is what you would see on tradingview.com
Is EUR/CHF a good pair to trade for beginners or advanced traders?
EUR/CHF can be a good pair to trade when you have a monetary policy divergence between the two central banks backing the currencies, the European Central Bank (ECB) for the EUR and the Swiss National Bank (SNB) for the CHF. For example, if the Swiss National Bank is raising interest rates and the ECB is cutting them or not doing anything, then you have a policy divergence and, in such cases, you would see the relative currency pair EUR/CHF depreciate or going down. When there’s no clear divergence between the two countries in their fundamentals, you can generally see this pair ranging or following the ebb and flow in risk sentiment. In fact, the CHF is considered a safe haven currency and it sees inflows in times of risk aversion. When there’s risk on sentiment in the market you can generally see EUR/CHF going up and when there’s risk off sentiment you can see the pair falling.
What session is best to trade the EUR/CHF?
The best times to trade EUR/CHF is during the European Session, also called the London Session. During this session you have both European and Swiss traders active, and this is also when we see major economic releases or central bank events for both countries. Given the huge impact the US news have on the market, the North American Session can also be a big driver for this pair. In fact, when something good or bad happens in US economy, this can have a big impact on the whole market and impact the EUR/CHF pair as well. For example, if the US economy is doing bad, this will make the whole world to suffer and in turn send the market into risk off, ultimately favouring the CHF as a safe haven currency.
Is the EUR/CHF an important pair or a carry trade?
Currency exchange rates are important for the respective countries. A weak currency can increase exports and thus growth because foreigners will have a stronger currency and more purchasing power leading to them demanding more goods and services from the country that has a weak currency. A too weak currency though can spell trouble because it may increase inflation and the central bank has a mandate of keeping inflation stable, so if it increases too much, the central bank will start to increase interest rates which will strengthen the currency. On the other hand, when the currency is too strong it increases imports and diminishes exports because foreigners will buy less goods and services because their purchasing power will be weaker. This can create a trade deficit (more imports than exports). The EUR/CHF exchange rate is especially important for the Swiss National Bank and it’s famous for constantly intervening in the FX market to depreciate the Swiss Franc when it appreciates too much. That’s also why the SNB created the EUR/CHF peg at 1.20 in 2011 before surprisingly abandoning it in 2015.
Will the EUR/CHF go up or down?
The EUR/CHF has been on a clear downtrend for several months for a couple of very important fundamental reasons. The global economy has been slowing down since roughly the second half of 2021 due to soaring inflation and economic issues in China, which is the second biggest economy in the world. This favoured the CHF as a safe haven of course. Moreover, lately the SNB even switched to a tighter monetary policy and also stated that it wants a strong CHF, something that they have been fighting against for a decade. This of course helped the Swiss Franc even more and after the first SNB rate hike in June 2022, the EUR/CHF pair fell by almost 10% over the following three months. As of now, the fundamentals are not yet pointing to a better global economic outlook. A global recession is still in the cards for the next 6-12 months and the CHF should benefit from inflows due to the risk aversion in the markets. So, for at least the next 3-6 months the EUR/CHF pair should keep on trending downwards.
Why doesn't EUR/CHF move very much?
The EUR/CHF pair hasn’t been moving much when there was the SNB peg at 1.20 from 2011 to 2015. It’s been trading in a roughly 5% range or 500 pips. When the SNB removed unexpectedly the peg though, the pair started to trade freely and, excluding the absolute killer reaction soon after the peg removal, the pair has been trading quite nicely. This pair is very sensitive to the risk sentiment in the market, and you can see it going up in risk on environments and going down in risk off scenarios.
How has the Swiss National Bank's peg historically influenced EUR/CHF?
The SNB introduced the EUR/CHF peg in September 2011 when there was lots of uncertainty in the financial markets and Europe was going through a debt crisis. The Swiss Franc is considered a safe haven, so the inflows into the currency were pushing up its value. The Swiss economy is heavily dependent on exports and a strong CHF hurt exporters as their goods and services were becoming less appealing to foreigners. To counteract this strength in the Swiss Franc, the SNB created the peg and started to increase the supply of Francs to sell them in the market to buy Euros. The 1.20 in the EUR/CHF exchange rate was the floor that the SNB said it will be defending. On January 15th 2015, the SNB unexpectedly removed the peg and caused the pair to fall by 25% in a period of 24 minutes of trading! The reaction was so brutal that many hedge funds, brokers and so on went bust. In the chart below you can see both the period of the peg and the insane drop after the SNB abandoned the peg.
How to trade the EUR/CHF?
The best way to trade currencies in general is to have a fundamental idea for direction, which is generally based on macroeconomics such as central bank’s monetary policy, growth, inflation and so on, and technical analysis for risk management. For example, let’s say that you view the global recession as being a good driver for the CHF coupled with a hawkish SNB. So, you will want to mainly take short positions. You also need to manage your risk though. Where can you enter in order to have a small risk exposure but a bigger profit potential? You can use technical analysis.
So, you open the EUR/CHF chart and use technical concepts like support and resistance, trendlines, indicators and so on to decide where to open a trade. For example, in the chart below you can see how you could use the previous swing level as a resistance soon after the pair dropped due to the SNB event. You had a strong fundamental reason to short the pair and you could use that resistance level to limit your risk in case the market went against you for some reason. In this trade you could have gained at least 5 times more than what you risked.
Where can I trade EUR/CHF?
You can trade EUR/CHF or any other Forex pair with a broker. Always choose a good, reputable, and regulated broker to avoid unnecessary problems. When you open a trading account with a broker, you will have to deposit money to be able to trade and then use the broker trading platform to execute your trades. Most retail brokers let you trade on MetaTrader 4 or MetaTrader 5, which are two of the most famous and popular trading platforms among retail traders. Most retail brokers offer CFD trading for Forex, although you can also trade EUR/CHF via other derivatives like futures or options that are more expensive than CFDs.
EUR/CHF correlation
EUR/CHF is correlated with EUR/USD due to the safe haven status of the Swiss Franc and the US Dollar. Euro generally loses against both when there’s risk aversion in the markets and the future outlook for the global economy is gloomy. In the picture below you can see how the two pairs are similar.
