I want to give more insight with EUR/CHF analysis through following topics:
- EUR/CHF Name Analysis
- EUR/CHF Analysis Popularity
- How to Trade EUR/CHF
- Trading Session Pip Range
- What is EUR/CHF Daily Range
- EUR/CHF Weekly Range
- Monthly Range and Pip Range History
- What Impacts EUR/CHF Volatility
- Connection Between Volatility and News
- EUR/CHF Analysis – What to Take From Here
One of most known cross trading pairs in the Forex market.
EUR/CHF Name Analysis
EUR/CHF trading pair does not have any special name in Forex trading market. There is nothing special trader could use to name this pair but you can use EUR/CHF combination for future use.
EUR/CHF Analysis Popularity
Euro and CHF currency as EUR/CHF trading pair is well known and highly traded on the Forex market. It is third most frequently traded cross pair with $44 billion average daily volume. This volume set the pair to 25th most commonly traded pair on the Forex market with 0.9% daily volume of all Forex market.
CHF currency is called safe haven currency where investors transferred their money in case of crisis or uncertainty in the market. This is visible on 2008/2009 when crisis hit the market. EUR/CHF exchange rate fell from 1.5447 to a low of 1.2400 what was 20% loss in value.
One case happened on the CHF currency in 09/2011. Swiss National Bank (SNB) decided to set a fix rate to EUR currency. This has been active from 09/2011 up to 12/2014 where price had a high at 1.2648 and low at 1.1987. They have decide to do it because CHF currency was so popular during crisis and to limit flow of money into their country as save heaven.
SNB decided on 15.01.2015. to abandon this fix rate and EUR/CHF pair fell 41%(from 1.20 to a low of 0.85) which mean EURO have lost its value against CHF or looking from the other side CHF have gained in value. This was a day with one of the highest move in Forex history where EUR/CHF trading pair had massive drop. This drop had such a great impact on the traders, hedge funds and brokers where some of them had to close the doors.
Since then EUR/CHF trading pair is trading in a range up to 1.2004.
With these information’s you can base your trading strategy on this pair and trade it inside this range. Take a look on the chart below which shows you a range between pair is moving.
How to Trade EUR/CHF
Something useful you can take from here is that EUR and CHF are in correlation. Also there is visible swing move on the trading pair where one move can last for longer period o time.
Comparing it to USD/CHF which is short term and with correlation, EUR/CHF can be traded comparing it to USD. When USD/CHF pair is going high EUR/CHF probably will go down. Sometimes this correlation can go over 90% which means there is high probability that you can rely on this.
Another way of trading EUR/CHF is to look for support and resistance levels where price stalls or bounce. If you take a look on the image above “EUR/CHF trading range” you can see pair is respecting levels on monthly basis. While it is in the range you can see on weekly time frame how there is support and resistance level that trading pair is respecting.
You can set Sell Limit or Buy Limit order and wait until price comes to that level. On the image below you can see price is currently around support level and there pin bar setup on the weekly time frame.
So there are two signals saying price could go higher. Third signal that tells you is that support level is old level where price bounced which means there are buyers who could push the price again to previous resistance level.
Stop Loss should be placed below pin bar. If price goes below pin bar it means support level is broken and sellers are stronger. So it is important that you set stop loss to avoid larger loss if price do not go in your direction.
EUR/CHF Analysis – Trading Session Pip Range
Lets dive into EUR/CHF trading pair analysis to see how the pair behaves in different hour, day and month. I want to emphasize that the time of the candle price is taken out from the platform which is on GMT+1.
First chart shows how the pair is doing on the trading sessions compared to other trading pairs. I have ordered pairs on the chart to easily see which pair has lowest and which have the highest volatility.
The EUR/CHF is the fourth trading pair with the lowest volatility in all trading sessions which implies that the pair is the one of the slowest among all other pairs. The EUR/CHF analysis shows us that traders love to trade it but without large pip range during each session.
Read more: Forex Market Trading Session
Which Trading Session Should You Trade
If you are not bond to the time frame during each day like if you live in Australia, and it does not make a problem for you to trade on the London or New York trading session, then you can extract the best volatility from the market.
On Sydney and Tokyo session you will have some volatility which can be enough for almost every strategy because pip range more than 50 pips is great. Moving from Asian session to European, London, session we see rise in pair volatility.
The London session gives us great volatility which is double than the Sydney session on some days in a week. Because the EUR is European currency, many traders love to trade this currency and consequently pair have higher volatility.
During the London session we have overlap with New York session which gives us more volatility because U.S. traders jumps in the market. During overlap, news on the U.S. market are published which impacts all currencies in the world.
You will see further in this post on the chart how overlap time have impact on the pair volatility during the day.
From this chart you should take information that the EUR/CHF analysis shows you that:
- pair have highest volatility on the London trading session
- during overlap with New York session, the trading pair have increased volatility
- starting from the Monday, volatility increases
- volatility peak is in the middle of the week, on Wednesday and Thursday
- Volatility is still high on the Friday, but a little lower than Thursday
EUR/CHF Analysis – Daily Range
If you take a look how overlap looks like then you understand why pip range is higher on these times. The trading session chart shows that time between 2 trading session, the London and New York, happens between 14:00-18:00h(GMT+1).
How does the time overlap looks on the daily pip range, measured in hours during a day is shown on the next chart. Immediately you can see that time between 14:00-18:00 have rise in pip range which confirms above said.
Time overlap between the London and New York trading session, news publishing, large amount of traders on the market have a result as increased pip volatility in that time.
It is not only the London and New York trading session overlap that makes a difference in pip volatility. You can see that the trading session overlap between the London and Tokyo make a change on the pair volatility.
EUR/CHF Analysis – London Session
The London session is known as the largest one and while the EUR is Europe currency, traders like to trade that currency. We see increase in pip range from 09:00h up to 11:00/12:00h.
Around noon we see drop in pip range on the London session. Mostly this is due to lunch brake in Europe, positions are set and traders relax in next 2 hours waiting for the New York session.
EUR/CHF Analysis – New York Trading Session
Around 14:00h we see rise on the pip range and reason for this is that U.S. traders together with the Europe traders are active on the market. The EUR/CHF volatility increases due to large amount of trades.
Traders form their positions and mostly around that time news from the U.S. are published. News have high impact on this pair because the USD currency is widely connected to all other currencies. So, when the USD currency moves all other currencies also move, more or less.
Going to the end of the day you see that the pip range starts to decline, especially when the London trading session finishes (17:00h). Large amount of traders close their position, EUR/CHF volatility declines and pair is traded less.
By the end of the day the pip range is at same level as it was on the start of the day. Sydney and Tokyo trading session takes over and another day comes.
What you should take from these two charts for your trading:
- During a day the pair have highest volatility on the trading session overlap
- Two trading session overlap have increase in the the pair volatility, Tokyo-London and the London-New York session
- The best time to trade is on the London-New York trading session overlap where the pip volatility is at the highest rate
- You should close your positions, if you are a day trader, until the London session closes to avoid later “slower” movements
EUR/CHF Analysis – Weekly Range
On the next chart I will show you how the pair is doing on the weekly basis, but not on the trading sessions. This information you can incorporate into your trading strategy when you plan to trade this pair.
Similar to chart “EUR/CHF analysis – trading session pip range” this chart shows similar data on the pair volatility. Starting from the Monday, the pip volatility increases. This increase we can connect with waking of the market after weekend.
From the Monday to Wednesday, traders makes they trading strategy and enters into trades. Trends on the pair movement start to form. Traders looks what is pair trend, make trading plan when to enter and exit and which news will have impact on the trading pair.
These key characteristics are done over weekend before or on the start of the week. When all is done traders enters into positions and they day trade or wait several days to exit their positions.
When the pair hits Wednesday, mostly traders start to plan to exit trades. The pair volatility declines to the end of the week. On the Friday there is still volatility, higher comparing to the Monday, but lower than the Wednesday or Thursday.
On the Friday traders tend to close their positions due to weekend on which sometimes can news be published, which have high impact on the pair. So, to avoid that kind of possible problem, if news are against trader, they close their position on Friday.
Friday – Day for Profit Lock
During the Friday you could see that the price of the pair reverse against weekly trend. Reason for this is also in closing positions of the traders who takes their profit from the market.
What you should take from this chart:
- On the Monday prepare yourself for trend forming
- Until the Wednesday do not trade or scalp if you are scalper or day trader. Wait until highest volatility hits the pair where you can extract most out of this trading pair
- If you are weekly or long term trader wait until the Wednesday until the trend is formed or confirmed
- On the Friday get out from the trading pair if you are uncertain will there be any news over the weekend which could impact the trading pair volatility
EUR/CHF Analysis – Monthly Range and Pip Range History
In the next part of the blog post I will show you 12, twelve, charts which shows the EUR/CHF analysis over few decades in order to give you the best pair volatility overview.
On the chart above you can see that average monthly pip range is around 300 pips. Only one month have average pip range over 400 pips. Comparing this information with other trading pair like GBP/JPY which have the highest pip range volatility where average is 900 pip we see that EUR/CHF is not so volatile.
There is only one spike visible on the chart below where pip range have sky rocket up to 3500 pips. Because of this we have average line rising and you should not pay attention on it because it does not give us correct information.
Correct information is that average pip range is declining like on the most trading pairs.
February did not had any huge events that moved market in one or another way. Year 2009 is the year of financial crisis and few increased months with larger pip range is visible on the chart below.
Compared to other months it is month with lowest average pip range and one of two month with rise on average monthly pip range line.
Only years that had some increase in pip range are the crisis year. All other months are in monthly average with around 300 pips.
Except crisis years there was no increase volatility in April. Comparing last years with previous ones you can see that pip range is declining.
Average pip range line is declining steadily with low slope. Without large spike above 600 pips in 2018 we would have low pip range volatility in the last few years.
June had spike on 2010 because of news from SNB about their intervention on the market.
July is a month with almost straight monthly average line. Generaly speaking there were no major events except 2011 year where SNB had intervention about 1.2 cap on the Euro.
August is second month with rise on the average monthly pip range.
Spike that occurred in 2011 was because of intervention from SNB where they decreased three-month Libor by 0.5 percentage points.
This decision had impact on the market with increase volatility with over 1200 pip range.
These events caused spike in this month which is shown on the chart under this text.
- Read here for more information about global financial crisis in October 2008
This we call large spike where event made three or four times larger monthly pip range compared to “standard” monthly pip range.
2008 and 2010 year were years in which November had impact on the trading pair pip range. Impact resulted in 800 average pip range. 2010 year had change in Libor percentage where SNB lowered target range for Libor by 150 basis points.
Again in December of 2008 SNB intervened by lowering target for three month Libor by 50 basis points to 0 and SNB started with transfer of non liquid asset from UBS to stabilization fund.
EUR/CHF Analysis – Monthly Conclusion
You see spike on 2008/2009 or 2016 year. Those spikes have occurred on the big events which had large impact on the pair EUR/CHF volatility.
In year 2007-2009 major financial crisis hit whole world and EUR/CHF was not spared of large movements.
2012 year was a year with very low volatility on the pair because of SNB target cap of 1.2 against Euro. Pip range did not exceed more than 100 pips on any month. This was a period that were not acceptable for traders who wanted to earn some money.
2016 for EUR/CHF pair were influenced by GBP referendum where U.K. nation has decided to leave European Union. You can read here more information. This referendum had so much impact on the currency that several years after that, question about Brexit is still open and uncertain how will end.
Small volatility leaves smaller opportunity for traders because it is much easier to grab some pips in over 100 daily pip range instead trading on 70 daily pip range. So, in these times you can expect that you will have lower average pip income.
This directly impact on the trading results because smaller pip movement can be hard to trade when spread or commission is to large. Sometimes opening a trade is not worth of the costs you will pay just to enter into the trade.
Smaller volatility can trick you in a way you think there is a trend but momentum slows down and you get stuck in a trade. You have less trades available or signals from your trading strategy and your strategy begins to give you less profitable trades.
What we see generally by average line on each month is that average pip range is declining from 2009 and we do not have such volatility as before. Only April have average line climbing. This gives us less opportunities to catch higher number of pips but still pair has large volatility that allows us to trade it and to earn money.
What Impacts EUR/CHF Volatility
Japan imports crude oil and natural gas products to satisfy domestic energy requirements. So, price of Yen is close connected with price of the energy commodities.
In addition to price of energy, political situation and domestic monetary policy play a role in defining price of trading pair.
- Energy commodities
- Political situation
- Monetary policy
- Macroeconomic indicators
After 2009 rarely one of the months had greater volatility compared to years before. Less volatile market can be result of geopolitical risks, or declining of global wealth, interest rates policy.
Connection Between Volatility and News
As any currency in a world EUR and CHF are affected by news. Here is a list of news which have impact on the currency and which impacts your trading strategy:
- Monetary policy
- Price Inflation
- Confidence and sentiment
- Economic growth, GDP
- Balance of payments
For CHF currency mostly news from SNB have great impact. SNB meets four times per year to update monetary policy. News that are published in Europe which are mostly in the morning have impact for the next few hours. Also news from U.S. that are three to four hours later have also high impact on the CHF crosses. So, CHF currency combined with other currencies, like EUR, USD and JPY have volatility during extended time period during day.
Price, Inflation, GDP and Monetary Policy
Countries with high level of inflation depreciate more compared to other currencies. Inflation causes the central bank to intervene in a way as adjusting interest rate to control undesired effects.
When interest rates is increasing that is good for currency so you can expect price of EUR will rise. Why does it rise – because when there is high interest rate in country it attracts more investors who can benefit on high rates.
But have in mind that trading pair chart is not only with one currency but with two currencies. This means sometimes if interest rates is increasing for EUR it could happen that trading pair value will not increase. Reason could be that CHF is stronger even interest rate on EUR is rising pair price could remain moving sideways or even falling.
PPI, CPI, PMI and GDP
- PPI as Producer’s Price Index
- shows trends within sale markets, manufacturing industries and commodities markets
- CPI as Consumer Price Index
- Consumer Price Index measures inflation that is most important indicator of the economic health of that country
- PMI as Purchasing Managers Index
- shows us are purchasing managers optimistic or pessimistic about the economy
- GDP Gross Domestic Product
- tells us how much the economy is strong, hod does it advance and is it healthy or not
These indicators have impact on the price of any currency and they are ones which you should watch. Price index is telling how the price of consumer goods and manufacturing material is doing. These prices have impact on inflation and consequently on interest rates.
GDP is overall information how country is doing and this information will have large impact on the price of currency.
I will not go more into details about these indicators but you can check for more information on the links I have gave.
EUR/CHF Analysis – What to Take From Here
As I have give a lot of information in EUR/CHF analysis there is useful information you can use in your trading.
- Pair have large volatility and high movements
- Use overlap in trading sessions, London and New York, to extract as much pips is possible because then you will have the highest movement
- During a week choose to trade on middle of the week, Wednesday and Thursday because then you have best volatility and chance to grab pips from the market
- Watch for Friday – lock the profits you have to avoid impact from weekend news if there is any
- Any month in a year is good to trade. There is no big difference between them
- Watch out on published news and indicators that have large impact on the currency
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