CADCHF

Introducing CADCHF

The CADCHF currency pair is the combination of two quite popular currencies, the Canadian Dollar and the Swiss Franc. The Canadian Dollar is the eighth most popular currency after the USD. It is the national currency of Canada. The Swiss Franc is the twentieth most popular currency. It is the national currency of Switzerland and Lichtenstein. Both Canada and Switzerland belong to the G8 which is why they’re extremely popular. The G8 are the top 8 most developed or industrialized countries in the world. They’re highly looked upon for their economic conditions. Together, the CADCHF currency pair is the twentieth most popular minor currency pair in the forex industry. Let’s take a look at these currencies individually:

The Canadian Dollar

The Canadian dollar is the official currency of Canada. The Canadian Dollar is the eighth most popular currency in terms of trading volume. It is also the world’s fifth most widely held reserve currency. Canada has used the Canadian Pound as its currency since 1841. This occurred at the time when the British ruled the world.

However, the United States quickly became the most popular, and the USD quickly surpassed all other currencies. In order to enhance ties with the United States, it adopted the Canadian Dollar as its currency in 1858. The Bank of Canada is in control of CAD note production. Canadians are renowned for their sense of humor and the distinct flavor they bring to the English language. They frequently use the same phrase to refer to their paper notes. The $1 note is commonly referred to as a ‘Loonie,’ while the $2 note is referred to as a ‘Toonie.’

The Swiss Franc

The Swiss Franc is the official currency of Switzerland and Lichtenstein. It is one of the few currencies that did not get booted off as a result of the establishment of the Euro in the EU. Switzerland wanted to keep its own currency, the CHF.

The Swiss Franc is the twentieth most popular currency in terms of trading volume. It accounts for 1% of the daily trading volume in the forex industry. It is also the world’s seventh most widely held reserve currency. The Swiss National Bank is responsible for the production of the Swiss Franc notes. Switzerland is a popular place to hold assets as its private banking system is among the best in the world.

Why Trade CADCHF

Following are some top reasons to trade the CADCHF currency pair:

High Yielding Asset

Canada is well-known for its high-interest rates, which are given by the Bank of Canada. These high-interest rates are considerably higher than those of market giants such as the United States and Japan. When compared to Canada, Switzerland has much lower interest rates.

Traders are drawn to the CADCHF currency pair due to its high-interest yields as a result of these interest rates. This pair provides significant yields due to the large difference in interest rates between them. Because of the large payouts, traders frequently utilize a carry trade when trading this currency pair. Carry trade is the practice of selling a currency with a low-interest rate in order to purchase one with a higher interest rate.

Commodity Correlations

A great reason to trade currency pairs like the CADCHF is because of their correlations to other assets in the market. This can be seen in the case of the Canadian Dollar which has great correlations to commodities which include metals and energy resources. Their most popular metal exports include gold and silver. Similarly, their most popular energy export is crude oil. It can also be seen in the case of the Swiss Franc which has great correlations to commodities such as pharmaceuticals and watches. This is because they’re highly involved in the exports of these valuable products. Therefore, it makes it even simpler to trade this pair as if we understand the direction of the commodities market, we can easily understand the direction of the CADCHF market as well. We’ll get into more detail later on regarding how exactly these commodities will impact the movement of CADCHF.

Market Predictability

Predicting market conditions for the CADCHF is rather straightforward. This is due to the fact that they are most influenced by developments in their respective countries, Canada and Switzerland. Because the USD is the standard currency for global transactions, any changes anywhere in the world would have an impact on a pair including the USD. Similarly, any changes that occur anywhere in the European Union’s 28 member countries would have an impact on a pair that contains the Euro. As a result, maintaining track of every location that may have an impact on a currency pair becomes rather difficult. Forex pairs that are simply tied to a certain region, such as CADCHF, are much easier to forecast since we just need to analyze their local economies.

CADCHF Trading Tips

Following are the best trading strategies you can use for the CADCHF currency pair in order to trade it successfully:

Trade Timings

Both Canada and Switzerland are in completely different time zones and therefore have the disadvantage of needing to be watched for more than a certain period in a day. Most economic changes that impact the EU and Switzerland occur from 6 am to 9 am GMT. This is when the CHF currency can face a shift in market value. On the other hand, most economic changes that impact Canada and the States occur from 12:30 pm to 2 pm GMT. This is when the CAD currency can face a shift in market value. Overall, the best time to trade the CADCHF currency pair is when the US and European sessions overlap between 12 pm and 5 pm GMT.

Carry Trading

Carry trade is the practice of borrowing a low-interest-rate currency to invest in a higher-interest-rate currency. This allows you to lock in a higher rate of return on your investment. When using the carry trade strategy, you must first decide on the funding and asset currencies. The currency traded in the transaction is known as the funding currency. This currency often has a lower interest rate. The Swiss Franc is the funding currency here. The one with the higher interest rate is the asset currency and is the Canadian Dollar here. Selling the CHF while simultaneously acquiring the CAD, is critical for successful CADCHF carry trading. When this happens, you will be paid interest based on the difference in interest rates between CAD and CHF as well as the amount of your investment.

Economic Conditions

One of the most important things to keep an eye out for when trading forex pairs like the CADCHF is economic news for their respective currencies. If there is something major coming up in Canada and Switzerland, it is preferable to hold any positions until we know the outcome of whatever we are waiting for. This is due to the fact that the value of the CADCHF may grow or drop based on the outcomes of the reports or events. It may even become exceedingly volatile and manifest itself on both sides of the market. To be able to trade more effectively, it is therefore critical to always be aware of who is going to happen in these areas.

Factors Affecting CADCHF

Following are the top factors that impact the market conditions of the CADCHF currency pair:

Unemployment Rate

The unemployment rate plays a huge role in determining the value of the CADCHF currency pair. This is especially on the side of the CHF since Switzerland is popularly known for its extremely low unemployment rate. Any changes to the number of people who are employed in a country will impact the country’s economy.This is because the more people who are unemployed, the more the government has to provide for those people out of its own budget. This significantly reduces the value of a country’s economy. If the unemployment rate increases in Switzerland, CHF will drop in value which will make CADCHF increase in value. Similarly, if the unemployment rate increases in Canada, CAD will drop in value which will make CADCHF also face a decline.

Financial Institutions

Both the Bank of Canada and the Swiss National Bank are majorly responsible for any instability in the CADCHF marketplace. The BOC and SNB release monthly reports and statements regarding updates to any policy changes. These reports also display the economic and monetary forecasts for the upcoming short-term. Any positive results from the BOC will have a positive impact on the CADCHF currency pair.

However, any positive results from the SNB will have an inverse impact on the CADCHF currency pair. The representatives of these individual banks also hold speeches frequently where they explain these results in more detail. These speeches are just, if not more, important in determining the direction of the CADCHF market. From BOC, Sharon Kozicki who is the Deputy Governor of the institution is highly looked upon for her speeches. From SNB, Thomas Jordan who is the Governor of the institution is highly looked upon for his speeches.

The Tourism Industry

Switzerland is one of the most popular tourist destinations around the world. Any changes to the number of tourists entering Switzerland will play a huge role in determining the value of the CHF currency. During the holiday season, more tourists are visiting Switzerland which makes the value of CHF increase and in turn causes CADCHF to drop in value. Similarly, when it isn’t the holiday season, not many tourists are visiting the country which makes CHF drop in value and in turn causes the value of CADCHF to rise.

The Crude Oil Industry

Canada is one of the largest exporters of crude oil in the world. Any changes to the demand for this product plays a huge role in determining the value of Canada’s economy. If the demand for crude oil rises around the world, Canada will be able to export them more often which will make CAD increase in value.

This would then cause CADCHF to also increase in value. Similarly, if the demand for crude oil falls around the world, Canada won’t be able to export them as much as usual which will make the CAD drop in value. This would then cause CADCHF to also drop in value.

The Pharmaceutical Industry

Switzerland is one of the largest exporters of pharmaceutical products around the world. These include mainly medicines but other pharmaceutical products as well. Any changes to the demand for these products plays a huge role in determining the value of Switzerland’s economy. If the demand for medicines and other pharmaceuticals rises around the world, Switzerland will be able to export them more often which will make CHF increase in value. This would then cause CADCHF to drop in value. Similarly, if the demand for medicines and other pharmaceuticals falls around the world, Switzerland won’t be able to export them as much as usual which will make the CHF drop in value. This would then cause CADCHF to face an increase in value.

The Gold Industry

Canada is one of the largest exporters of gold and other metals in the world. Any changes to the demand for this product plays a huge role in determining the value of Canada’s economy. If the demand for gold rises around the world, Canada will be able to export them more often which will make CAD increase in value.

This would then cause CADCHF to also increase in value. Asian wedding seasons is the best example where the demand for gold is usually seen skyrocketing. Similarly, if the demand for gold falls around the world, Canada won’t be able to export them as much as usual which will make the CAD drop in value. This would then cause CADCHF to also drop in value.

The Clock And Watch Industry

Switzerland is popularly also known for its production of clocks and watches. They produce some of the finest quality watches in the world. Their watches are quite popular internationally and therefore, makes up a big chunk of their exports. Any changes to the demand for these products plays a huge role in determining the value of Switzerland’s economy. If the demand for clocks and watches rises around the world, Switzerland will be able to export them more often which will make CHF increase in value. This would then cause CADCHF to drop in value. Similarly, if the demand for clocks and watches falls around the world, Switzerland won’t be able to export them as much as usual which will make the CHF drop in value. This would then cause CADCHF to face an increase in value.