The USDCHF is considered to be a special pair to trade in general but after the SNB (Swiss National Bank) this January, we can say now it is even more difficult to be trade.
The reasons for the above are coming from the fact that the CHF is thought to be a safe heaven currency, meaning when times are tough and people/investors are trying to protect their money, they are looking for the best value for them, even if sometimes they are paying a high interest. It is the case with the CHF today as the interest rate is negative, -0.75% and this means that a customer that wants to deposit in Swiss Francs, pays for the privilege the bank is keeping its money.
This negative interest rate territory is something new in modern economics and the purpose is to stimulate people to leave more money into the real economy rather that keeping them in a savings account.
The usdchf pair is of course reflecting the economic differences between the US and Swiss economies and therefore when such news are being released, the pair is traveling.
Out of the United States, the most important pieces of news that influence the pair are: FOMC meetings and minutes, press conferences and testimonies, Fed member speeches, CPI (Consumer Price Index), NFP (Nonfarm Payrolls), GDP, ISM manufacturing and non-manufacturing and Retail Sales.
The Swiss economic releases are centered around the Swiss National Bank interest rate decisions as they are moving markets. Beside this, the KOF indicator, a sort of a local PMI in Switzerland, together with inflation (cpi) are the ones that matter the most.
One more thing to consider when trading the usdchf pair is the fact that the SNB (Swiss National Bank) is constantly intervening in markets so when you see a sudden spike and there’s no real reason for it, then you should kno the SNB is there.
Trading A Currency Pair – USDCHF
2015 started with a bang when the Swiss National Bank (SNB) decided in early January to drop the peg on the EURCHF cross and it caused a lot of troubles in the market in the sense that brokers went busted and a lot of them had to cover for the losses their clients made.
The SNB is a central bank that is actively involved in the FX market so if you’re trading binary options based on an FX pair you should know that the central bank is influencing prices.
As long as the EURCHF peg at the 1.20 was functioning (and it did for some years), trading the USDCHF was pretty simple in the sense that the closer the EURCHF was dealing to the 1.20 level, the stronger the inversed correlation between the EURUSD and USDCHF became. In other words, if one had a scenario in which EURUSD is bullish, so traded call options, just taking a put option in the opposite direction on the USDCHF without even looking at a chart should have resulted in a profitable option.
Important Economic Releases To Watch In Switzerland
Like any currency pair, this one is influenced by how the Swiss economy is doing. Swiss economy is a big exporting one and just think of the chocolate industry or the watch industry and you’ll have an idea about the size of its exports. Therefore, the value of the currency is extremely important to Swiss companies and this is one of the reasons why the SNB is intervening on the market with the sole purpose to devaluate it. So for, not with much success.
SNB meetings are followed by a press conference and when things really go to extremes, the currency is moving. Now that the SNB is having negative interest rates in place it is interesting to see that the USDCHF still is not trading above parity, as CHF buyers still persist despite adverse conditions.
Other news to be watched are the CPI – inflation of course as well as the KOF indicator as this one gives an overall view regarding the state of the Swiss economy.
Important Economic Releases To Watch In United States
When it comes to United States, we must start with the fact that this is the biggest economy in the world and it goes without saying that a lot of important economic news are being released each and every month.
Because the central bank of the United States, the Federal Reserve, is having a dual mandate, it is obvious that jobs data (Non-Farm Payrolls) and inflation (CPI) are the ones that really matter. However, there are some other pieces of economic releases that influence markets, as follows: ISM (Institute for Supply Management) Manufacturing and Non-manufacturing (these are the equivalent of Europe’s PMI’s mentioned a bit earlier, Retail Sales (released on a monthly basis), GDP (release on a quarterly basis), PPI (Producer Price Index), ADP (private payrolls), Durable Goods Orders, etc.
What To Expect From Economic Releases
FOMC (Federal Open Market Committee) is meeting every six weeks and forward guidance and economic projections are being published as well as a press conference every 2-3 meetings. During these events, the US dollar is moving sharply and as a consequence all US dollar related currency pairs are moving as well, USDCHF included.
As from the Swiss side, expect the unexpected as this central bank is known for its indecisions and abrupt and shocking moves.