The Swiss Franc (CHF) is one of the most traded currencies globally, and also one of the major 8.
CHF is the currency of Switzerland. And it is issued by the Swiss National Bank (SNB).
Is there anything particular to CHF?
Yes, let’s discover that below.
What drives price for the Swiss Franc (CHF)?
When there’s uncertainty in the markets, both JPY and CHF appreciate since investors and traders see them as better stores of value.
In this fashion, CHF price is frequently (as in, almost every week) affected by safe haven flows.
This happens both ways:
CHF goes up when uncertainty happens (and the markets go into a risk-off sentiment).
And CHF goes down when said sentiment fades, and the markets decide to load up (again) on risky assets (like stocks).
Of course, CHF is greatly influenced by the SNB’s actions, since it can change interest rates.
Moreover, to make things more exciting, the SNB doesn’t really do much in the way of forward-guidance.
This means they don’t give clues to the markets before making policy changes.
As such, traders and investors can be shocked by a surprise move, essentially driving CHF price big time!
But we’ve spoken enough about Central Banks, monetary policy, and how these two affect currency valuations.
In this piece, we will focus more on the safe haven aspect of the Swiss Franc.
Every pair is different, and we will go into some of the more popular ones (like USD/CHF and EUR/CHF).
In this piece, however, we’re dealing with CHF on its own, so we will investigate how the Swiss Franc is affected (usually), and what you can do.
As mentioned in the previous section, CHF and JPY are haven currencies.
Almost every week, there’s at least one instance of risk-off tone, due to some geopolitical event, or any other event which brings uncertainty to the markets.
The newer the event, and the more serious its nature, the stronger JPY and CHF will get (and the more they’ll unwind once things dissipate).
With this in mind, it’s important to know that trading safe haven flows is hard.
You can easily see why the flow started, but you’re almost never sure when positions will unwind.
Thus, you have to keep an eye on price action since it can begin to reverse on you at a moment’s notice.
With this caveat aside, these kinds of flight to safety events happen often, which gives you frequent opportunities to siphon pips from the markets.
Even if the events aren’t mountain-shaking, you can grab 15 pips here, 22 there… and so on.
These small gains amount to significant earnings once the month’s up.
Trading these events isn’t that different from other occasions.
1. You identify the safe haven move.
2. Look for the weakest currencies at the moment (to pair them to CHF or JPY).
3. Check the charts for important technical levels
4. Analyze what you have from steps 1-3 and decide: whether to enter, at what price to enter, your SL, and TP target.
You can also do the opposite: trade an unwinding by pairing a weakening Swiss Franc (or JPY) with a strong currency at the time.
What about sudden policy changes?
This one is quite simple.
With most Central Banks (who tip-off the markets before policy changes), reactions to policy moves can be “subdued”, unless there’s something unexpected.
While I said “subdued” this doesn’t mean price won’t move a lot. But it may reverse shortly if things went down mostly as expected.
is because traders already priced the move in by trading in favor of it before
the move took place.
With the Swiss National Bank and the CHF its simpler though.
Since you only see the announcement, if it surprises the markets you must jump right in.
Because price will likely take-off.
How long the move lasts, depends on how the markets view future decisions (was this a one-off, if so, price may reverse shortly).
While this is a great way to make pips, keep in mind that the SNB only announces rate decisions 4 times a year (Bummer…).
That’s all for now.
See you later,
The Forex Economist
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