Secrets Of Trading Chfusd Currency Pair Profitably!

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One of the best currency pairs to trade is the Swiss Franc (CHF) and US Dollar (CHF). In times of financial crisis, investors tend to dump USD and flock to CHF. The main reason for this is that CHF is considered to be a reliable currency. It tends to hold its value when other don't. This has something to do with the traditional expectations that the currency market has developed for CHF over many decades.

The most important expectation is that Switzerland tends to have reliable economic fundamentals. Switzerland is known to have a strong aversion to high inflation. It has a history of current account surplus. Plus it has a sound and well known banking system where the rich and the famous and the bold and the beautiful tend to store their wealth.

Switzerland has the 4th largest reserves of gold in the world and still pegs CHF to gold. CHF money supply is tightly controlled so as not to exceed these gold reserves. Rather the gold reserves exceed the CHF money supply. This gives a strong foundation to CHF in times of financial crisis. Switzerland has a long history of neutrality in times of political crisis and tension. This policy of political neutraliy gives the Swiss Central Bank (SCB) independence in making its monetary policy. This is in sharp contrast to the European Central Bank that is beholden to the whims and wishes of its memeber countries. Each one of them trying to push its economic agenda. SCB is very strict againt fighting inflation and has a policy target of 2% inflation in the economy. This makes CHF a very stable currency.

With a tight monetary policy, investors expect CHF to be a stable currency that can hold its value over the period of time. Now trading the CHFUSD pair can be highly lucrative. Both EURUSD and USDCHF pairs move in opposite direction. So you can trade both these pair simultaneously to hedge your risk.

Now, a change in a major fundamental factor like some breaking news or some unexpected economic release can cause the EURUSD to move suddenly. This sudden move of EURUSD pair is always accompanied by an equally sharp move by CHFUSD in the opposite direction.

When trading CHFUSD pair, you need to know what is happening to the CHF money supply with the data on CHF M3. M3 is the broadest measure of money supply in the economy. You also need to keep an eye on inflation in the Swiss economy by watching the Swiss CPI. If Swiss CPI increases, SCB is surely going to increase the interest rate to check it. But sometimes, this may not happen and SCB may let inflation soar a little bit so as to achieve its unemployment target. You need to watch both US and the Swiss unemployment data to figure out how the FED and the SCB are going to react againt inflation! After knowing the fundamentals, it is the technical analysis and the charts that you need to use in making your decisions in trading CHFUSD pair. Fundamental analysis is always long term while technical analysis is short term. Technical indicators should be used to confirm a trend or a range in CHFUSD pair. In the end, always trust the charts and trade what they say!


About the Author:
Mr. Ahmad Hassam has done Masters from Harvard. Get these Forex Scalping Cheatsheets FREE. Discover the top 10 Forex Robot World Cup Robots- #1 robot is already 156.96% up in profit in just 11 days!



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