EUR/CHF

EUR/CHF is the currency pair encompassing the European Union’s single currency, the euro (symbol €, code EUR), and the Swiss franc of Switzerland (code CHF).

The pair’s rate indicates how many Swiss francs are needed in order to purchase one euro. For example, when the EUR/CHF is trading at 1.1000, it means 1 euro is equivalent to 1.1 Swiss francs.

The euro (EUR) is the world’s second most traded currency, while the Swiss franc (CHF) is the world’s sixth most traded currency, resulting in a comparatively liquid trading pair.

Swiss National Bank Crisis

The EUR/CHF is most commonly defined by the events of 15th of January, 2015 – the date on which the Swiss National Bank (SNB) decided to lift the cap imposed on the Swiss Franc from 2011.

This was set to a maximum of just over 0.83 euros, meaning the EUR/CHF would not be allowed to fall below 1.2.

The reason why the cap was imposed in the first place was sparked by the Eurozone debt crisis.

The Swiss government feared rising investment into their national currency was hampering its economy and exports, with the SNB explaining:

“The minimum exchange rate was introduced during a period of exceptional overvaluation of the Swiss franc and an extremely high level of uncertainty on the financial markets. This exceptional and temporary measure protected the Swiss economy from serious harm.”

At the start of 2015, the SNB decided their franc was in a much healthier environment, and not as overvalued as previously – resulting in the decision to abandon the euro peg, thereby sending the EUR/CHF smashing the 1.2 level.

The crash caused immense losses to both traders and forex brokers, with lots of brokers going out of business.

Perhaps the most high-profile casualties being Alpari UK, along with FXCM and its subsequent bailout.

For those brokers that survived, they had to no choice but to cease trading on all CHF pairs.

With the euro peg was in place, it was not uncommon for traders to use this to their advantage, buying EUR/CHF as price neared 1.2000 levels.

Traditionally, EUR/CHF is seen as a decent candidate for scalping, due to its relatively predictable price action (SNB flash crash notwithstanding), and stable spread.

Trading the EUR/CHF however does generally require more patience compared to other pairs, thanks to its lesser volatility.