The USDCHF
USD/CHF
The USD/CHF is the currency pair encompassing the dollar of the United States of America (symbol $, code USD), and the Swiss franc of Switzerland (code CHF). The pair’s exchange rate indicates how many Swiss francs are needed in order to purchase one US dollar. For example, when the USD/CHF is trading at 1.2500, it means 1 US dollar is equivalent to 1.25 Swiss francs. The US Dollar (USD) is the world’s most traded currency, whilst the Swiss franc (CHF) is the world’s sixth most traded currency, resulting in a very liquid pair, with tight spreads, often staying within the 0 pip to 2 pip spread range on most forex brokers. Even though the Swiss franc might not be as liquid as the euro or yen, the USD/CHF currency pair is still liquid enough to be known as the fourth major. Trading the USD/CHF has its advantages and disadvantages. The main advantage being, a lot of traders often prefer to invest in the Swiss franc when economic or political instability is lurking.This is due to Switzerland traditionally being known as a safe haven, as it generally remains neutral and silent on many major geopolitical events, for example it never participates in wars. These investments can trigger large swings for traders, who may capitalize on such moves. The main disadvantage is that the US dollar is the world’s reserve currency.Thus, traders also can flock to the USD, trying to ascertain which currency is more likely to be embarked upon can prove tough at times. USD/CHF Still Living in Shadows of 2015The USD/CHF otherwise is seen as one of the lesser volatile pairs, with a tendency to follow the Euro, hence the negative correlation between it and the EUR/USD.The currency pair will forever be tethered to the events of January 2015 with the Swiss National Bank (SNB) Crisis which roiled currency markets.In this instance, the SNB abruptly decided to abandon the Swiss franc (CHF) currency peg with the euro, convulsing markets.
The USD/CHF is the currency pair encompassing the dollar of the United States of America (symbol $, code USD), and the Swiss franc of Switzerland (code CHF). The pair’s exchange rate indicates how many Swiss francs are needed in order to purchase one US dollar. For example, when the USD/CHF is trading at 1.2500, it means 1 US dollar is equivalent to 1.25 Swiss francs. The US Dollar (USD) is the world’s most traded currency, whilst the Swiss franc (CHF) is the world’s sixth most traded currency, resulting in a very liquid pair, with tight spreads, often staying within the 0 pip to 2 pip spread range on most forex brokers. Even though the Swiss franc might not be as liquid as the euro or yen, the USD/CHF currency pair is still liquid enough to be known as the fourth major. Trading the USD/CHF has its advantages and disadvantages. The main advantage being, a lot of traders often prefer to invest in the Swiss franc when economic or political instability is lurking.This is due to Switzerland traditionally being known as a safe haven, as it generally remains neutral and silent on many major geopolitical events, for example it never participates in wars. These investments can trigger large swings for traders, who may capitalize on such moves. The main disadvantage is that the US dollar is the world’s reserve currency.Thus, traders also can flock to the USD, trying to ascertain which currency is more likely to be embarked upon can prove tough at times. USD/CHF Still Living in Shadows of 2015The USD/CHF otherwise is seen as one of the lesser volatile pairs, with a tendency to follow the Euro, hence the negative correlation between it and the EUR/USD.The currency pair will forever be tethered to the events of January 2015 with the Swiss National Bank (SNB) Crisis which roiled currency markets.In this instance, the SNB abruptly decided to abandon the Swiss franc (CHF) currency peg with the euro, convulsing markets. Read this Term fell sharply yesterday after the surprise SNB hike of 50 basis points. The pair smashed through a number of technical levels including the 100 hour MA (blue line), 200 hour MA (green line), 50% retracement of the move up from the May 27 low at 0.97968, The 61.8% at 0.9737.
The price entered a low “extreme” area that confined the pair from May 23 to June 6th between 0.9544 and 0.9669.
Today, the price action has been up, down and back up as traders ponder “what now?”.
Does the USDCHF continue the selling to and through the lower May extreme? Or, does it further correct and see what resistance is above?
On the topside, the pair will is up testing a swing area between 0.9713 and 0.9723. A move above that area would have traders looking toward 0.9748 to 0.9763 and the 38.2% retracement of the move down this week at 0.97846 (not shown). All those targets would need to be broken on further upside momentum, in order to swing more of the bias to the upside.
Conversely, a move back into the red box consolidation extreme below the 0.96693 would reignite the idea of a retest of the lows from May at 0.9544.
Taking a broader look at the daily chart below, the ups and downs over the last 2 months looks like it favors a retest of the lows from May just because it would be more symmetrical (or at least testing the 50% retracement at 0.95774). A move below 50%, and the May low would have traders looking toward the 100 day moving average at 0.94845. That is also near a swing high area between 0.9459 and 0.9477.
From April 2021 until April 2022, the price of the USDCHF traded above and below its 100/200 day moving averages until finally basing against the 100 hour moving average on April 5 and starting a 29 day moved to the upside that took the price up 830 or so pips. That was followed by a 9 day run to the downside of about 520 pips. The the next 13 days took the price up 503 pips. Finally, the 3 day decline this week has seen 430 pips to the downside. That is a lot of volatility.
Volatility tends to beget volatility
Volatility
In terms of trading, volatility refers to the amount of change in the rate of an index or asset, such as forex, commodities, stocks, over a given time period. Trading volatility can be a means of describing an instrument’s fluctuation. For example, a highly volatile stock equates to large fluctuations in price, whereas a low volatile stock equates to tepid fluctuations in price. Overall, volatility is an important statistical indicator used by many parties, including financial traders, analysts, and brokers. Volatility can be an important determinant in developing trading systems, protocols, or regulations.In the retail space, traders can be successful in both low and high volatile environments, however the strategies employed are often different depending upon volatility. Is Volatility Good or Bad? In the forex space, lower levels of volatile across currency pairs offer less surprises, movements, and are suited to certain types of individuals such as position traders.By extension, high volatile pairs are attractive for many day traders. This is due to rapid and strong movements, which collectively offer the potential for higher profits.However, the risk associated with such volatile pairs are manifold. Of note, volatility with instruments or indices can and do change over time. There can be periods when even highly volatile instruments show signs of flatness, with price not really making headway in either direction. For example, certain months in the summer are associated with low trading volatility.Too little volatility is just as problematic for markets as too much. Too much volatility can instill panic and create its own issues, such as liquidity constraints.A famous example of this are considered Black Swan events, which have historically roiled currency and equity markets.
In terms of trading, volatility refers to the amount of change in the rate of an index or asset, such as forex, commodities, stocks, over a given time period. Trading volatility can be a means of describing an instrument’s fluctuation. For example, a highly volatile stock equates to large fluctuations in price, whereas a low volatile stock equates to tepid fluctuations in price. Overall, volatility is an important statistical indicator used by many parties, including financial traders, analysts, and brokers. Volatility can be an important determinant in developing trading systems, protocols, or regulations.In the retail space, traders can be successful in both low and high volatile environments, however the strategies employed are often different depending upon volatility. Is Volatility Good or Bad? In the forex space, lower levels of volatile across currency pairs offer less surprises, movements, and are suited to certain types of individuals such as position traders.By extension, high volatile pairs are attractive for many day traders. This is due to rapid and strong movements, which collectively offer the potential for higher profits.However, the risk associated with such volatile pairs are manifold. Of note, volatility with instruments or indices can and do change over time. There can be periods when even highly volatile instruments show signs of flatness, with price not really making headway in either direction. For example, certain months in the summer are associated with low trading volatility.Too little volatility is just as problematic for markets as too much. Too much volatility can instill panic and create its own issues, such as liquidity constraints.A famous example of this are considered Black Swan events, which have historically roiled currency and equity markets. Read this Term as it is a function of uncertainty, but change. The SNB hike in rates was a surprise and a catalyst for the move to the downside.
USDCHF has seen some strong and powerful moves
For now, watch the hourly chart targets for the short term clues. Extend above the upside target levels and ultimately through the 38.2% retracement, would give the buyers short-term control.
Fail and start to move back into the lower extreme from May, and the technical picture looks different.
