Article Directory :: Finance & Investment Articles

Trading CHFUSD Currency Pair Secrets

By Ahmad Hassam

Republish: EasyPublish™ Published: 30Jan2010 Word count: 406 Viewed: 547 time(s) Get Free Content For Your Site

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.

Swiss Franc (CHF) is still pegged to the gold. Switzerland has the fourth largest gold reserves in the world. Gold reserves with the Swiss Central Bank (SCB) significantly exceed the CHF currency in circulation. Switzerland has a long history of political neutrality spread over a period of many centuries. What this means is that SCB is independent in making its monetary policy as compared to the European Central Bank (ECB). SCB goal is to not let inflation exceed the 2% target.

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.

Now CHF can be affected by the following data that you need to keep an eye while trading the CHFUSD pair. The most important is the release of CHF M3 ( this the broadest measure of money supply in an economy). The second is the release of Swiss CPI. Now as said before, SCB has a target of 2% inflation but these targets are not set in stone. Sometimes, the central banks let inflation soar in order to spur economic activity. You also need to keep an eye on the unemployment data in both US and Switzerland.

EasyPublish™ this article - publishers click here

More articles by Ahmad Hassam

Free Report!
Ten Essential Secrets Of Article Marketing ... Grab Your Free
Copy Now:

Need Content?
Regular Top Quality Content for your Blog, Ezine or Website ...
Delivered Direct,
For Free!
Click For Details