Euro and Swiss franc are quite an interesting pair, which is characterized by long-term trends. The instrument is preferred by swing trading oriented traders. One of the main features of the asset is its relationship with the American dollar.
This circumstance should be taken into account. Since the strength or weakness of the dollar has a direct impact on both the euro and the franc. But it manifests itself in completely different ways for each currency. Therefore, currency corridors are formed with the possibility of obtaining a large spread.
Also, the US economy is the largest in the world, which means that its strength affects many other countries. Although the strong relations between EUR/CHF and USD/CHF are partially due to the common dollar factor in the two currency pairs, the relations are much stronger than in other currency pairs due to the close ties between the eurozone and Switzerland.
Surrounded by other members of the eurozone, Switzerland has close political and economic ties with its larger neighbors. These ties and relationships began with the Free Trade Pact, signed back in 1972.
This was followed by more than 100 bilateral agreements that opened up the Swiss labor market to EU citizens and attracted thousands of qualified specialists to the country. And since the two economies are closely connected, if the European market will shrink, Switzerland will feel a ripple effect.
Even despite the close relationship and direct dependence on the dollar, trading this pair can be justified. Until now, experienced traders recall the year 2011, when the investors in a panic began to get rid of the euro before the European Central Bank’s speech and quote changed by 1000 points in just a couple of hours.
And although this does not happen often, the pair can surprise with good corridors and allows you to earn a large margin.
How to trade
EUR/CHF transactions are considered exclusively for the long term. The market constantly has weak volatility, but sharp rebounds are possible on daily timeframes, which will lead to the false triggering of stop-loss if you use them.
To avoid losses, it is recommended to perform technical analysis and identify the bottom. In 90% of cases, fluctuations never break the bottom during the trading session, and in a relatively stable economic situation, this indicator can be considered constant.
To successfully trade EUR/CHF, it is recommended that you set a stop loss of 50 pips below the estimated bottom. If you see that the trend is going in the wrong direction, do not panic. The pair shows amazing stability, so the exchange rate will recover and go up.
There is also no need to be greedy with profit – 100-150 points on this instrument is considered a good margin. Given the proper use of leverage, such a transaction will bring tangible profits.
Despite the stability of the market, EUR/CHF may dramatically change the trend due to a reaction to the news from the banking sector. For a trader, this will mean a losing deal. Therefore, it is not recommended to invest more than 10% of the capital in open order.
Active trading should also be avoided in anticipation of the release of economic reports from major European and Swiss companies. It is worth being careful several days before the announcement of a new interest rate for the EU.
And of course, do not forget that the Swiss franc is a fairly strong currency, so the national bank artificially weakens it. During periods of additional money supply, the exchange rate is most unstable and unpredictable
At this time, you can break the jackpot or lose the entire deposit, so most traders choose more liquid and safe assets for a period of high volatility.