The EUR / CHF currency pair is an important currency pair, especially in Europe and can be traded consistently with the highest liquidity. The euro is the currency of the largest supranational currency area in the world, the Swiss franc has always been an escape currency, but for a long time also a carry trade currency.
Traders who trade with a long position in the EUR CHF, rely on an appreciation of the euro against the Swiss franc. If traders trade a short position in the euro Swiss franc, they expect the euro to depreciate in favor of the federal currency.
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Characteristics of the currency pair EUR / CHF:
- Is characterized by high liquidity
- Regulation takes place via the ECB or SNB
- Main trading hours are in the London session
- EUR / CHF is also referred to as carry trade currency
- Trading is more recommended for experienced traders
EUR CHF trading in Forex: process of a currency transaction
The course of a transaction on the FX market is always the same. Traders get into debt in a currency and hope to be able to repay the debt later at more favorable terms. If an investor intends to trade a long position in the euro Swiss franc, he carries out two transactions schematically.
First, a loan is taken out in CHF. Second, the entire loan amount is exchanged for EUR. At this point, two accounts exist in parallel: a credit account in EUR and a credit account in CHF. If the investor is correct with his forecast and the euro appreciates, the position can be closed at a profit. To do this, the investor exchanges the EUR balance in CHF. Due to the change in the exchange rate, the CHF balance exceeds the credit balance. The difference is the profit.
When trading EUR / CHF, the purchase of euros alternates with CHF. If the euro appreciates, the exchange in CHF follows. In this case, the trader has made a profit.
EUR CHF exchange rate in quantity and price quotation
The euro-Swiss franc exchange rate is usually shown in the format of the quantity, The rate then indicates the number of CHF units that are currently being paid on the market for EUR 1.00. In the format of the price quotation, the price corresponds to the reciprocal of the price quotation price. The exchange rate expresses how many units EUR are paid for 1.00 CHF.
The currency pair EUR / CHF is given primarily in the quantity quotation, rarely in the price quotation.
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What is special about the euro-Swiss franc currency pair
Mainly due to its domestic economic policy, the Swiss franc has asserted itself in the euro, US dollar, Canadian dollar and Japanese yen circles, The EUR / CHF currency pair is traded comparatively frequently and offers Forex traders exciting trading opportunities.
An insight into bank sight deposits at the Swiss National Bank provides information as to whether and to what extent the SNB intervenes were. Interventions by the respective central banks aim, among other things, to reduce dependence on strong currencies such as the US dollar - reason enough to deal not only with Switzerland's economic but also with political developments, for a little more security when trading with the currency pair EUR / CHF. As with the Australian dollar, the Swiss franc is characterized by a high degree of influence in Swiss export business.
The currency pair EUR / CHF is one of the comparative "smallest" yet most important currency pairs. It is characterized above all by a high level of liquidity.
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Historical data and currency developments
With increasing Intervention by the SNB in the areas of the credit and real estate market, the Swiss franc, once called the " Safe Harbor " currency, has now given up its safe ground.
The most important influences The Swiss Francs include
- in the current account surplus
- in the economic stabilization
- in economic growth
- in inflation
- in the export business and consequently in the influences on the purchasing power of trading partners
The main business hours of the currency trading pair EUR / CHF are in the London session. The London session is also known as the European session. It opens at 8 a.m. and closes the business day at 5 p.m. GMT. In mid-January 2015, the Swiss National Bank, SNB, caused EUR / CHF to fall sharply. This resulted from the lifting of the minimum exchange rate of the Swiss franc of CHF 1.2000.
Until now, the SNB had intervened repeatedly to strengthen the Swiss franc. Fluctuations like these should be treated with caution, especially for inexperienced forex traders. Online brokers reacted to fluctuations, so 100 pips were not uncommon in such phases. If the Swiss currency was considered to be relatively stable against exogenous shocks by the timely intervention of the SNB by the timely intervention of the SNB, the Swiss franc lost it when the minimum exchange rate was lifted. Traders who bet on the EUR / CHF currency pair before the minimum exchange rate was canceled could almost rely on the currency pair not falling below EUR / CHF 1.2000 as the SNB would intervene quickly enough to withstand the currency pressures from the euro zone. The SNB did not object to the appreciation of the euro. With this property, which was valid until January 2015, traders in beginner status were already able to achieve good profits at comparatively significantly lower risk.
The SNB once had a minimum exchange rate of 1.2000 EUR / CHF " The "Swiss Franc" currency has been trading without a minimum exchange rate since mid-January 2015.
Carry trade currency definition
Since 2014 at the latest, the EUR has been a carry - Trade currency traded. In connection with the Swiss franc, the EUR / CHF currency pair is usually defined as a carry trade currency pair. To enable EUR / CHF to trade Forex via carry trade, low-interest to non-interest-bearing euros are borrowed and investments are made in the purchase of higher-interest Swiss francs. The optimism of the market has a significant influence on the decision to hold or to end the position. If the market is optimistic, this goes hand in hand with the fall of the euro. If traders who trade with a risk-averse Forex strategy step onto the market, the market evolves towards a rising euro due to risk aversion.
The Carry-Trade - Strategy is one of the simplest strategies in Forex trading. It can already be used by forex beginners. Due to the high liquidity of the currency pair EUR / CHF, both trading and the application of this strategy to the Euro and Swiss Francs should only take place after sufficient trading experience has been gained.
Conclusion: A significant currency pair
Despite the placement according to EUR, Yen, Pound and Dollar and the resulting currency pairs, the EUR / CHF currency pair maintains its trading relevance. To avoid unnecessary risk, this currency pair should be traded by experienced traders. Until the minimum exchange rate ceased to exist in January 2015, the Swiss franc was considered a particularly stable currency. Hence the designation of the "safe haven" currency.
By releasing the minimum Swiss franc exchange rate, the EUR / CHF currency pair will tend to become the currency pairs with possible high exchange rate fluctuations. Online brokers, such as IG Markets or Plus500 (Plus500 experience), offer their customers up-to-the-hour charts and market analyzes that are geared to the development of the EUR / CHF currency pair. Learning materials from brokers help beginners, free online seminars and advanced training help advanced to move even better in Forex trading and make decisions. Trading is always associated with risk. Traders can lose their invested capital.
Above all, the development of the loss of the EUR / CHF minimum exchange rate makes it clear how risky Forex trading can already be with this small currency pair. Trading experiences via a demo account can avoid beginner mistakes, train the feeling for the setting of stop loss or trailing stops and enable real trading experiences using real market data.
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