Situation on franc swiss
A reader asked me to have a look at franc swiss. He has to change euro to franc suisse (eur to chf) on regular basis and he do not like the current exchange rate. I tought that this would be also a good moment to check situation on all franc swiss pairs.
Old major pair
In Forex, we have four most popular major pairs:
EUR/USD: The euro and the U.S. dollar
USD/JPY: The U.S. dollar and the Japanese yen
GBP/USD: The British pound sterling and the U.S. dollar
USD/CHF: The U.S. dollar and the Swiss franc
Of course eur/usd is the most important one (and most traded), but other pairs are also good for trading. Except usd/chf and eur/chf which were great to trade few years ago. Situation changed after Swiss central bank started intervention to protect it’s currency.
Lets check how it looked before. Below is monthly chart of eur/chf which started in 1995. You can see clearly that we had here a good long term downtrend:
You can see that after 2010 we have narrow range move (marked areas). Mostly because of intervenstions from Swiss central bank.
Similar thing on usd/chf:
So we may ask a question is USD/CHF still a major pair? For traders – not that much. It is hard currency to trade because we have clearly a range move here.
But… we have to remember that franc suisse is very important currency and we have banks and other individuals who are selling euros or dollars and are buying franc. So when we speak about currency importance then yeah, it is still a major and important currency.
The problem with suisse franc
There is one big problem that Switzerland have with own currency. People believe that this is a safe currency. So we observed that before. After crush in stock market in 2008 investors were taking money away from stocks and they were buying gold of franc suisse. We can see that clearly on gold chart. When situation calmed down and it was clear that bulls are back on stock market then investors were selling gold and they were back in stock market.
Situation like this repeat itself time after time. Lately we had Brexit and again people started to buy swiss franc. Again, swiss central bank had to do something – http://www.reuters.com/article/us-britain-eu-cenbanks-swiss-idUSKCN0ZA1RP
“Switzerland’s central bank on Friday gave rare confirmation that it had intervened in the currency market to weaken the Swiss franc in the wake of Britain’s vote to leave the European Union.
On the back of the unexpected Leave vote, the safe-haven franc rose EURCHF=EBS to its highest level against the euro since August 2015 and had its biggest one-day jump since the Swiss National Bank removed its franc peg to the euro on Jan. 15, 2015.”
It looks like Swiss central bank is determinated to protect suisse currency.
So, can you trade usd/chf and make some money?
If you are a longterm trader then that’s rather not that good idea. You can see even on daily chart that this is a range (and a mess):
When we check lower timeframes it is not that bad. First, we can see that franc respect pivot points. Here we have 1-hour chart with weekly pivots:
Same thing with Fibonacci. You can trade suisse with Fibo tools, below 5-min. chart:
Not that bad. One thing you have to remember is that when your trading system is based on trend then you should be careful.