What should I know before investing in the USD/CHF?
The USD/CHF is the currency pair that corresponds to the exchange rate between the US dollar and the Swiss franc. It is also known as the "Swissie".
This cross indicates the amount of Swiss francs needed to buy one US dollar. It should be remembered here that the US dollar is the world's reserve currency and therefore the currency in which most foreign debt is held. It is a major currency in the foreign exchange market.
As for the Swiss franc, it is the eighth most traded currency in the world but also and above all the official currency of one of the world's largest economies. This currency is not only used in Switzerland but also in Liechtenstein.
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Why invest in the USD/CHF?
We cannot give investment advice or opinions on specific transactions, as this would require financial analysis and individual knowledge of your situation. It is important to do your own research and consult a financial adviser before making any investment decisions.
However, we can provide you with some general information about the USD/CHF pair and the factors that can influence its price:
The USD/CHF is one of the most heavily traded currency pairs in the world. It is often seen as a safe haven, as the Swiss franc is perceived as a stable currency. This means that demand for the CHF can increase in times of economic uncertainty or geopolitical unrest.
When is the best time to trade the USD/CHF?
There is no single 'best' time to trade the USD/CHF, as it depends on a number of factors, such as :
- Your trading strategy: If you are a scalper trader, you will focus on small price movements over short periods, whereas a swing trader will look for opportunities over longer periods. The best time to trade may differ according to your approach.
- Relevant economic indicators: The release of important economic data, such as interest rates or GDP figures, can lead to increased market volatility, which can be interesting for some traders.
- Your time zone: The Forex market is open 24 hours a day, 5 days a week, so you can trade USD/CHF at any time of the day. However, liquidity may be lower during certain hours, which may affect the execution of your orders.
- Your risk tolerance: Market volatility can vary throughout the day. If you are a risk-averse trader, you may prefer to trade during periods of lower volatility, while more aggressive traders may look for opportunities during periods of higher volatility.
Switzerland's economy and the factors that influence the CHF :
Switzerland's economy is small but has great importance in the world of finance. Its GDP is largely produced by financial services and the country is valued in the context of global fund storage due to its particularly strict policy on banking secrecy and neutrality.
So if you want to invest in the USD/CHF rate, you should be aware of the country's specific economic characteristics and the various factors that can influence its rate. The Swiss franc rate can be influenced by
- Economic data and publications with data on the country's GDP and more precise information on industrial production and retail sales but also trade balances or the inflation rate. Employment figures are also important for your analysis.
- Meetings and publications of the SNB or Swiss National Bank will also be very important to understand the evolution of this currency pair.
- You should also follow natural disasters, the political climate and any changes in the country's government which may influence the exchange rate of this currency.
- You should also keep an eye on Swiss banking services. Indeed, the international demand in this sector of activity, which represents a secure and confidential place for the deposit of funds offshore, is one of the elements that contributes most to the value of the Swiss franc.
- Finally, it will also be necessary to closely monitor the global economic health and stability. Indeed, the Swiss franc represents an alternative to the dollar or the pound sterling in case of turbulent and uncertain markets. Thus, when an economy shows signs of deterioration, the Swiss franc tends to gain popularity in the Forex market and its price may appreciate.
The US economy and factors influencing the US dollar:
The US economy is of course at the centre of the world economy. As such, the US dollar is currently, and has been for a long time, the most liquid Forex currency as it is the most traded currency in the world.
The factors you need to follow to understand how the dollar may move in this market are as follows:
- You will of course need to keep an eye on the figures and statistics regarding the US and its economy including GDP data, unemployment rate and durable goods orders.
- You should also keep a close eye on the publications, meetings and important events of the US Federal Reserve or Fed, which is the body that manages the dollar exchange rate. You will find the dates of this body's meetings in the economic calendar accessible directly from your broker's platform or website.
- The US economy is also dependent on the politics of the country. It is therefore important to follow the changes in government but also the relations of this government with other world governments.
- Finally, the economic exchanges between the US and the rest of the world will also have a strong influence on the price of the US dollar, also known as the "greenback".
How does trading the USD/CHF in Forex work?
The USD/CHF currency pair is offered by almost all Forex brokers in the market. On the platforms offered by these brokers, you can buy or sell positions on the exchange rates of the various currencies, including the USD/CHF, in order to profit from their variation.
Taking a position on the USD/CHF therefore consists of buying one of these two currencies while selling the other, depending on whether you anticipate a rise or fall in this exchange rate.
With regard to this currency pair, it should be remembered that the US dollar and the Swiss franc are so-called floating currencies. This means that their value on the market is not linked to any conditions other than those of the market and therefore of investors. Thus, we can see on the stock market charts of this cross that there are numerous daily variations with successive peaks and troughs.
Several strategies are possible to try to benefit from these price fluctuations. Some investors choose to practice day trading, i.e. to take short, quick positions in a single session. But you can also make a longer-term investment in this asset by holding an open position for several days.
Trading the USD/CHF currency pair has a few special features that you should be aware of, compared to other crosses in the market:
- High liquidity, which increases during economic crises
- High sensitivity to geopolitical developments in Switzerland and the US
- As this pair is very popular and volatile, there are many online resources to keep up to date with the latest news
- Trading the USD/CHF can be done with several different types of instruments including futures and CFDs.
- Finally, there are correlations between these two currencies and the British Pound, which is another high volume Forex currency.
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Conclusion: How to analyse the USD/CHF price?
As the USD/CHF currency pair is heavily traded in the forex market, its liquidity is very strong, ensuring that a counterparty can easily be found to buy or sell US dollars or Swiss francs.
This currency pair is also linked to several external elements that you can use as part of your fundamental analysis of this security. Of course, it is mainly the monetary policy that will influence this value. We will follow with interest the debt policy, the interest rates or the quantitative easing of deflation of the American Fed and the Swiss National Bank or SNB.
Furthermore, events that may influence the European Union market, in which Switzerland is deeply embedded, may also influence the Swiss franc and its exchange rate.
In addition, certain fears and uncertainties regarding the global economy may lead to a rise in the USD/CHF currency pair, as the Swiss franc is considered a safe haven due to the reputation of the country's banks. There is also a correlation with gold, where a rise in the price of gold can lead to a fall in the value of the cross.
Finally, there is also a correlation between the CGF and other major currency pairs in the foreign exchange market. For example, there is a correlation of this currency with the EUR/USD. When the Euro exchange rate with the US dollar falls, this often leads to greater investments in USD/CHF.
All in all, there is a lot of information and indicators that you can follow in your analysis of this cross. But don't forget to also perform a technical analysis of this stock using the live charts and the various indicators.
