How to Trade the EUR/CHF

Trading EUR/CHF requires a comprehensive understanding of both European and Swiss economies and global market dynamics. Traders employ various strategies, ranging from fundamental analysis to technical indicators, to capitalize on price movements in this currency pair. 

In this article, we will discuss how to trade the EUR/CHF in depth.

What is EUR/CHF?

EUR/CHF is the currency pair that represents the exchange rate between the Euro (EUR) and the Swiss Franc (CHF). In this pair, the EUR is the base currency, and the CHF is the quote currency. The value of one unit of EUR is quoted in terms of Swiss Francs. 

History of EUR/CHF

Between 2015-2023, EUR/CHF witnessed significant volatility, especially in 2015 when the Swiss National Bank removed its currency peg against Euro, as CHF soared by 30%. 

Meanwhile, the EUR/CHF witnessed its lowest during this tenure and touched an average of 1.07. However, the pair regained momentum and reached its highest in 2018, touching 1.16. Currently, the pair is trading around 0.94, up by 2.45% since 2023. 

Risks for trading EUR/CHF

The SNB has a history of actively managing the CHF's value by implementing policies like setting target exchange rates or intervening directly in the forex markets. The intervention can result in sudden and significant fluctuations in the EUR/CHF exchange rate, impacting traders' positions unexpectedly.

Moreover, as Switzerland is not part of the European Union, there exists a risk of political and economic divergences between the two regions, further complicating the trading landscape for EUR/CHF. Traders must carefully monitor these factors and employ risk management strategies to effectively navigate the specific risks associated with trading EUR/CHF.

Best time to trade EUR/CHF

Overlap of European and Swiss trading sessions

The EUR/CHF pair typically experiences higher volatility during the overlap of trading sessions in Europe and Switzerland. The European and Swiss financial markets are open between 8:00 AM and 12:00 PM GMT (Greenwich Mean Time).

London trading session

The London session is one of the most active forex trading sessions, and it typically overlaps with the European trading session. It runs from approximately 8:00 AM to 4:00 PM GMT. During this session, trading activity in the EUR/CHF pair tends to increase as traders react to economic data releases, news events, and institutional flows.

New York trading session

The New York session overlaps with the end of the European session and is the last major trading session of the day. It runs from approximately 8:00 AM to 5:00 PM EST (Eastern Standard Time). The EUR/CHF pair volatility may spike during the New York session, especially around the opening and closing times when trading activity tends to be highest.

How to trade EUR/CHF: Top strategies

Cross-border interest rate arbitrage

This strategy takes advantage of interest rate differentials between the Eurozone and Switzerland. Traders borrow currency with a lower interest rate (for example, Euros) and invest in currency with a higher interest rate (such as Swiss Francs). They aim to gain from the interest rate differential while benefiting from potential currency appreciation. However, this strategy requires careful consideration of interest rate changes, exchange rate movements, and borrowing costs.

Volatility breakout strategy

The strategy involves identifying periods of low volatility and potential breakout movements in the EUR/CHF pair. Traders monitor price levels where volatility expands, such as key support and resistance levels, or chart patterns like triangles or rectangles. When the price breaks out of these levels with high volume and momentum, traders enter positions in the direction of the breakout, aiming to capture gains as the price continues to move.

Dual moving average crossover strategy

It uses two moving averages, typically shorter and longer-term, to identify trend reversals and trade signals. When the shorter-term moving average exceeds the longer-term moving average, it signals a potential uptrend (bullish crossover), and traders may consider purchasing EUR/CHF. 

Conversely, when the shorter-term moving average crosses below the longer-term moving average, it indicates a potential downtrend (bearish crossover), prompting traders to consider exiting EUR/CHF.

Multiple time frame analysis strategy

This strategy involves analyzing the EUR/CHF pair across multiple time frames to gain a comprehensive view of the market. Traders typically start with a higher time frame (e.g., daily or weekly) to identify the overall trend and key support/resistance levels. Then, they zoom in to lower time frames (e.g., hourly or 15-minute charts) to pinpoint entry and exit points based on shorter-term price movements. Multiple time frame analysis helps traders make more informed trading decisions by considering both the long-term trend and short-term fluctuations.

Factors affecting EUR/CHF

Swiss National Bank (SNB) monetary policy

The SNB's monetary policy decisions, including interest rate changes and interventions in the foreign exchange market, can significantly impact EUR/CHF. The SNB's actions to maintain price stability and support the Swiss economy can influence the value of the Swiss Franc relative to the Euro.

European Central Bank (ECB) policies

Similarly, monetary policy decisions by the ECB, including interest rate changes, quantitative easing programs, and forward guidance, can affect EUR/CHF. Changes in ECB policy can impact investor sentiment toward the Euro and consequently influence the EUR/CHF exchange rate.

Currency pegs and bands

Historically, the SNB maintained a currency peg against the Euro, setting a minimum exchange rate for EUR/CHF. While the peg was removed in 2015, the SNB still closely monitors the exchange rate and may intervene in the forex market to manage extreme fluctuations. Understanding SNB interventions and their potential impact on EUR/CHF is crucial for traders.

Eurozone debt crisis

Events related to the Eurozone debt crisis, such as sovereign debt downgrades, bailout negotiations, or concerns about the stability of the Euro, can impact EUR/CHF. Heightened uncertainty in the Eurozone may lead investors to enter the Swiss Franc, causing appreciation against the Euro.

Swiss referendums

Referendums in Switzerland, particularly those related to monetary policy, immigration, or national sovereignty, can affect the Swiss Franc and EUR/CHF. Results that indicate a shift in policy direction or public sentiment may lead to currency volatility. 

Euro vs Swiss: Navigating currency dynamics

Navigating the complexities of EUR/CHF trading demands a multifaceted approach, blending economic insights with technical analysis and risk management strategies. Staying attuned to global events and market sentiment is critical to making informed decisions in this dynamic forex landscape.

FAQs

We’re here to help you every step of your trading journey. Here are some answers to the more frequent questions we get asked.

What is EUR/CHF?

EUR/CHF is the currency pair that represents the exchange rate between the Euro (EUR) and the Swiss Franc (CHF). It shows how many Swiss Francs are needed to exchange for one Euro, with EUR as the base currency and CHF as the quote currency.

What risks are involved in trading EUR/CHF?

Risks include interventions from the Swiss National Bank (SNB), political and economic developments in Switzerland and the European Union, and unexpected global events that can cause currency fluctuations.

When is EUR/CHF most actively traded?

EUR/CHF typically experiences higher trading activity during the overlap of European and Swiss trading sessions (8:00 AM to 12:00 PM GMT) and during the London and New York trading sessions. These periods often see increased market liquidity and price volatility.

What factors should traders consider when analyzing EUR/CHF?

Traders can analyze EUR/CHF using various techniques, such as interest rate differentials, breakout patterns during periods of volatility, or evaluating longer-term trends alongside shorter-term market behaviors for potential entry and exit points.

How does the Swiss National Bank (SNB) influence EUR/CHF?

The SNB actively manages the Swiss Franc’s value to maintain economic stability. Interventions or policy changes by the SNB can result in significant price movements in the EUR/CHF pair.

What impact do European Central Bank (ECB) policies have on EUR/CHF?

Decisions by the ECB, including interest rate adjustments or monetary policies like quantitative easing, often influence investor sentiment toward the Euro, which can affect the EUR/CHF exchange rate.

What role do Swiss referendums play in EUR/CHF trading?

Swiss referendums on topics such as monetary policy or immigration can create currency volatility. Significant outcomes may influence the Swiss Franc’s value relative to the Euro.

How can traders use multiple time frames to analyze EUR/CHF?

Multiple time frame analysis involves examining the EUR/CHF pair on longer time frames (e.g., daily or weekly charts) to identify trends and using shorter time frames (e.g., hourly or 15-minute charts) to refine potential entry or exit points.

How does the Eurozone debt crisis impact EUR/CHF volatility?

Concerns about the Euro’s stability during debt crises or sovereign downgrades can lead to heightened demand for the Swiss Franc as a safe haven, causing fluctuations in the EUR/CHF exchange rate.