NZD/CHF Trading Guide: How to trade the NZDCHF

Within global forex markets, there are a plethora of different currency pairs to be traded, each with its own particular characteristics and history. In this article we’ll take a look at the NZD/CHF currency pair, which is made up of the New Zealand dollar and the Swiss franc. Let’s dive in:

Understanding the NZD/CHF Currency Pair

The NZD/CHF pair exemplifies the broad economic influences and events that shape the trajectory of various forex pairs across the globe, while also offering unique features that make it distinct. As traders engage with this pair, they participate in a market influenced by the rich historical paths of both the New Zealand dollar and the Swiss franc. Therefore, in order to adequately understand the NZD/CHF pair, one must first learn about its two constituent currencies:

What Is the New Zealand Dollar?

The New Zealand dollar (NZD) was introduced in 1967, replacing the more complicated New Zealand pound. This change facilitated the adoption of a decimalised currency system, where the NZD is divided into 100 cents, making transactions simpler. Before this, the pound system was cumbersome, with 1 pound equal to 240 pence. The introduction of the NZD made monetary transactions more straightforward and improved financial processes. Initially, the NZD was pegged to the US dollar but switched to a free floating exchange rate system after the collapse of the Bretton Woods system in the ‘70s. As of 2024, the New Zealand dollar is the official currency of New Zealand and several associated territories, and it is the tenth most traded currency in the world.

What Is the Swiss Franc?

The Swiss franc is the national currency of Switzerland, one of the world’s most developed economies as measured by gross domestic product (GDP) per capita, as well as of the neighbouring microstate Lichtenstein.

In the early modern era, a variety of different local coins were in use across Switzerland. In 1798, the first precursor to the modern Swiss franc was introduced by the Helvetic Republic. However, it took until the mid-19th century for Switzerland’s national currency to replace the thousands of different coins, both foreign and domestic, as the main form of legal tender in the country. Historically, the Swiss franc has been regarded as a safe haven currency by many investors due to its backing with gold (XAU) reserves, although this legal requirement was abolished in 2000.

As Switzerland is neither part of the European Union nor of the Eurozone, its currency’s value rose sharply in the early 2010’s amid the fiscal and monetary turmoil experienced by the European Central Bank in face of widespread debt crises. Due to this trend, which many referred to as ‘overvaluation’, the Swiss Central Bank took measures to cap the franc’s relative value as measured against the euro and other currencies, a practice that remains in place to this day.

History of the NZD/CHF (New Zealand Dollar and the Swiss Franc)

The NZD/CHF forex pair, like many cross-currency pairings, has a unique and dynamic history shaped by global economic events and the distinct characteristics of each currency. This pair allows for direct trading between the New Zealand dollar and the Swiss franc, bypassing the need for conversion through major currencies such as the United States dollar, which may offer greater cost efficiency and reduced volatility for traders.

At the beginning of the 2000’s, the NZD/CHF pair tended to trade around 0.8. It experienced a brief decline before surging to a peak above 0.91 in late 2005. This upward momentum was followed by a sharp correction, yet the pair rebounded, reaching highs above 0.95 by mid-2007. However, the onset of the 2007-2008 “Great Recession” highlighted the Swiss franc's safe haven status, causing the NZD/CHF pair to plummet to lows below 0.58 by early 2009.

The pair showed resilience, recovering to highs above 0.79 by mid-2010, and then entered a period of sideways trading. In early 2020, during the global economic turmoil caused by the “Great Lockdown”, the NZD/CHF pair dipped to lows around 0.57. Following this downturn, the NZD/CHF recovered to around 0.64 in early spring of 2022, before experiencing a sustained decline. As of late June 2024, this forex pair was trading at approximately 0.55.

What is NZD/CHF Trading?

Trading the NZD/CHF pair involves attempting to capture the exchange rate fluctuations between the New Zealand dollar and the Swiss franc. This exchange rate reflects the current price at which one New Zealand dollar can be exchanged for Swiss francs. For instance, if the NZD/CHF pair is trading at an exchange rate of 0.55, it means 0.55 CHF is required to purchase 1.00 NZD.

Traders engaging in NZD/CHF trading, often through CFDs, attempt to capture the price movements of the exchange rate without owning the actual currencies. They execute long or short positions to profit from changes in the exchange rate, aiming to capture the difference between the entry and exit prices of their positions. These fluctuations are influenced by a variety of market factors, including economic data releases, policy differences between New Zealand and Switzerland, geopolitical events, and overall market sentiment. Understanding these factors is crucial for making informed trading decisions and effectively managing risks associated with currency volatility.

Trading the NZD/CHF pair offers significant opportunities due to the potential for substantial rate movements. However, it also comes with inherent risks, particularly when trading CFDs. This pair may be an attractive option for experienced investors looking to diversify their trading portfolios beyond more common forex pairs like EUR/CHF or EUR/GBP. By closely monitoring market trends and economic indicators, traders can strategically navigate the NZD/CHF market and potentially achieve profitable outcomes.

Why Trade the NZD/CHF Currency Pair?

When entering the world of forex CFD trading, the NZD/CHF pair may be worth a look. Known for its volatility, the NZD/CHF pair offers numerous trading opportunities due to the fluctuations in its value over time. However, as with all arenas of CFD trading, it's essential to weigh the potential for significant financial losses against the possible profits.

Trading the NZD/CHF pair allows you to engage with the economic health and monetary policies of two distinct regions: New Zealand and Switzerland. This enables traders to potentially capitalise on macroeconomic trends and news events. Additionally, forex CFD trading provides leverage, allowing you to control larger positions with a smaller capital outlay. While leverage can amplify potential gains, it also increases financial risks, making risk management crucial for successful trading.

What Are the Trading Hours for NZD/CHF CFDs?

On the Plus500 trading platform, you can keep track of the NZH/CHF’s price movements from anywhere in the world. While NZD/CHF trading is open from 10:00 PM CET on Sunday until the same time on Friday, these hours of availability may be different when trading NZD/CHF CFDs with Plus500.

Factors Affecting the NZD/CHF FX pair

Several key factors influence the NZD/CHF forex pair, the understanding of which factors is crucial for traders looking to make informed decisions. Perhaps the foremost among these are related to the respective countries' monetary policies and various economic data released by Swiss and New Zealand statistic agencies.

The overall economic health of New Zealand and Switzerland is a major factor influencing the NZD/CHF pair. Key indicators include GDP growth, import and export data, employment figures, and inflation rates. These metrics provide a snapshot of each country's economic stability and growth potential. Traders looking to keep updated on the latest metrics released to the public regarding these two countries could do worse than to check the periodic publication of the Swiss Federal Statistics Office (FSO) and Statistics New Zealand.

The FSO, Switzerland's national statistics office, publishes vital statistical information on the country's economy, population, and overall life.Traders pay attention to key indicators from the FSO, such as the Consumer Price Index, unemployment rate, and trade balance, to gauge the economic health of Switzerland and predict CHF movements. Statistics New Zealand, the national statistics agency, provides critical data that traders monitor closely. Key indicators include the Consumer Price Index (CPI), unemployment rate, Gross Domestic Product (GDP), import and export data, and travel and tourism statistics. These figures provide valuable insights into the economic health of New Zealand and influence the NZD.

Actions by the central banks, including interest rate adjustments and other monetary policy decisions, are critical. The RBNZ and the SNB influence their respective currencies through these policies, impacting the exchange rate of the NZD/CHF pair.

The RBNZ, New Zealand's central bank, plays a significant role in shaping the value of the NZD. It has as its central mission preserving and ensuring a sound, dynamic monetary environment and financial system. The RBNZ releases Monetary Policy Decisions seven times a year and issues Monetary Policy Statements quarterly. Additionally, it publishes Financial Stability Reports twice a year. These releases often have a substantial impact on the NZD.

The SNB, Switzerland's central bank, is responsible for targeting inflation and maintaining a stable monetary environment. The SNB announces its rates and monetary policy four times a year, but it also actively intervenes in the markets as needed. These actions can significantly affect the value of the CHF.

By understanding and monitoring these factors, traders may be better-placed to navigate the NZD/CHF forex CFD market and make trading decisions that accord with their personal trading strategies.

How to Trade the NZD/CHF Forex Pair?

Trading the NZD/CHF currency pair can be done through various methods, each offering unique advantages as well as drawbacks.

Spot Market

In the spot market, traders buy and sell currencies at their current prices, with trades typically settled within two business days. This method is straightforward and favoured for its simplicity and immediacy.

Forwards Market

In the forwards market, traders enter into contracts to buy or sell the NZD/CHF pair at a future date and a predetermined price. This method is useful for hedging against future price movements, allowing traders to lock in prices and manage risk.

Futures Market

The futures market involves standardised contracts traded on exchanges. These contracts specify the purchase or sale of the NZD/CHF pair at a future date and set price. Trading in the futures market provides greater transparency and reduced counterparty risk due to the standardised nature of the contracts.

Forex CFDs

A popular way to trade the NZD/CHF pair today is through forex CFDs. A CFD is a financial agreement between a CFD provider and an investor, allowing the investor to speculate on the price movement of the NZD/CHF pair without owning the actual currency. Instead, the investor trades on the price difference between the opening and closing of the contract. This method offers flexibility and the potential for leveraged trading, though it also carries increased risk.

Popular NZD/CHF Trading Methods

When trading NZD/CHF forex CFDs, a variety of trading methods can be employed to suit your personal trading goals and psychology. Here are several strategies you might consider:

Day Trading

Day trading involves executing multiple trades within a single day to capture short-term market movements. Traders using this method rely heavily on technical analysis, focusing on minute-by-minute price changes. Tools like candlestick patterns and moving averages are essential for identifying entry and exit points.

Position Trading

Position trading, as a strategy, takes a longer-term perspective with regard to trading outcomes. This method relies on fundamental analysis to identify longer-term trends and economic indicators that impact the NZD/CHF pair. Traders look at interest rate differentials, GDP growth, and political stability to make informed decisions.

Swing Trading

Swing trading captures short- to medium-term price movements over several days or weeks. Traders aim to enter trades at the start of a price swing and exit before the trend reverses. Technical indicators like the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) help identify these swings and potential entry/exit points.

Breakout Trading

Breakout trading involves entering trades when the price breaks through established support or resistance levels. Traders use this strategy to capture substantial price movements that typically follow a breakout. Volume indicators and chart patterns, such as triangles and flags, are used to confirm breakout strength and direction.

News Trading

News trading involves making trades based on economic announcements and geopolitical events that can impact the NZD/CHF pair. Traders stay informed about news releases, such as interest rate decisions, employment data, and political developments, and act quickly to capitalise on market reactions. This strategy requires a solid understanding of both fundamental analysis and current events.

Range Trading

Range trading focuses on identifying price levels where the NZD/CHF pair oscillates between support and resistance. Traders buy near support and sell near resistance, using technical trading indicators like stochastic oscillators and RSI to identify overbought and oversold conditions. Limit orders can be set to automate entries and exits around key price levels.

Incorporating these strategies into your NZD/CHF forex CFD trading can help you navigate different market conditions and optimise your trading performance. Choose the methods that align with your trading style and objectives for the best results.

Key Concepts for Trading NZD/CHF CFDs

When trading NZD/CHF CFDs, it’s important to understand several key concepts to navigate the market effectively.

Understanding the Currency Pair

The NZD/CHF pair measures the amount of Swiss Francs needed to purchase one New Zealand Dollar. This exchange rate is influenced by the economic health and monetary policies of both New Zealand and Switzerland. Factors such as GDP growth, employment figures, and political events play crucial roles in exchange rate fluctuations.

Leverage

Leverage is a critical aspect of CFD trading. It allows traders to control larger positions with a smaller capital outlay, amplifying both potential profits and risks. While leverage can enhance returns, it also increases the potential for significant losses, making effective risk management essential.

Risk Management

Given the volatility of the forex market, effective risk management is crucial. Using tools like stop-loss orders and setting appropriate leverage levels can help manage risks and protect your capital.

While effective trading depends on factors beyond those listed above, these concepts can form a solid knowledge base for approaching the forex CFD market. However, positive results are never guaranteed and the risk of closing a CFD position must always be taken into consideration.

Steps to Buying and Selling NZD/CHF CFDs With Plus500

1. Take Time to Learn: Make use of the available learning resources that can help you hone your knowledge of forex CFD market dynamics as well as the unique characteristics of the NZD/CHF pair.
2. Open Your Plus500 Account & Get Verified: Follow the account creation & verification process with Plus500 to begin your journey.
3. Begin Trading NZD/CHF CFDs with Plus500!

Conclusion

Understanding the intricacies of the NZD/CHF currency pair is crucial for navigating the dynamic forex market. This pair offers unique opportunities due to the economic influences and historical paths of both the New Zealand dollar and the Swiss franc. By staying informed about market trends, economic indicators, and effective risk management strategies, and adapting their strategies and choices to the changing landscape of the forex CFD market, traders can make a confident start to NZD/CHF forex trading.

FAQs

What affects the value of the NZD/CHF forex pair?

The value of the NZD/CHF forex pair is affected by economic data releases, monetary policies of New Zealand and Switzerland, geopolitical events, and overall market sentiment.

When can the NZD/CHF be traded?

The NZD/CHF pair can be traded from 10:00 PM CET on Sunday until the same time Friday on the Plus500 platform. However, please note that trading hours can differ on the Plus500 platform depending on the operator.

What are the different trading strategies used with the NZD/CHF forex pair?

Different trading strategies for the NZD/CHF forex pair include day trading, position trading, swing trading, breakout trading, news trading, and range trading.

How can I start trading the NZD/CHF?

To start trading the NZD/CHF CFD, open a Plus500 account, complete the verification process, and begin trading using the platform’s resources and tools.

How do you analyse the NZD/CHF?

Analyse the NZD/CHF by monitoring economic indicators from New Zealand and Switzerland, central bank policies, geopolitical events, and using technical analysis tools like candlestick patterns and moving averages.