CAD/CHF Trading Guide: How to Trade the CADCHF FX Pair

The exchange rate for the Canadian dollar and Swiss franc, known as CADCHF, reflects the relative economic strength of Canada and Switzerland. As of May 2024, Canada remains Switzerland's second-largest trade and investment partner in the Americas, a relationship held by the 2009 free trade agreement with EFTA. These economic ties can contribute to the volatility within the CADCHF market, where traders can potentially profit from changes in the exchange rate.

Main Points:

• The CAD/CHF is the abbreviation used to denote the value of the Canadian dollar relative to the Swiss franc.
• The CAD/CHF is regarded as a minor pair in the forex market because it does not constitute the US dollar.
• By trading CAD/CHF CFDs, traders can gain exposure to the price movements of the CAD/CHF exchange rate without ownership of either currency.
• Several factors contributing to the fluctuations observed in the CAD/CHF exchange rate include interest rates, inflation, geopolitical events, etc.

First and foremost, how did the Canadian dollar and the Swiss franc come into existence? A brief history of the Canadian dollar and the Swiss Franc is given as follows.

The History of the CADCHF (Canadian dollar and Swiss Franc)

History of the Canadian Dollar

Historically, before the Canadian dollar (CAD) was the Canadian pound. The replacement took effect in 1858, but it wasn't until 1871 with the Uniform Currency Act, that the CAD truly reigned over the whole Canadian provinces. Then in 1934, the Bank of Canada was established and issued the first Canadian dollar bills a year later.

History of the Swiss Franc

Historically, before the Swiss franc, Switzerland's monetary system lacked uniformity. Approximately 75 different organisations issued coins, resulting in 860 distinct types of currency circulating. In 1798, the franc was introduced but coexisted with various other coins and banknotes. However, in 1848, Switzerland adopted a new Federal Constitution that established the federal government as the sole issuer of currency within the country. Two years later, in 1850, the Federal Coinage Act formally introduced the first Swiss franc. This new franc became the official monetary unit of Switzerland.

Understanding the Canadian Dollar - Swiss Franc Currency Pair

The 2022 report by the Bank for International Settlements (BIS), titled "Triennial Central Bank Survey," highlights that the Canadian dollar is ranked seventh among the world's most-traded currencies in terms of trading volume, while the Swiss franc was ranked right below the Canadian dollars at the 8th position. These two closely ranked currencies have led to one of the most popular minor currency pairs in the forex market represented by the ticker symbol ‘CADCHF’.

What Is the Canadian dollar?

• The Canadian dollar is the official currency used for everyday transactions in Canada.
• The currency is symbolised by ‘C$’ and abbreviated as ‘CAD’.
• The C$1 coin used in Canada is nicknamed the "Loonie" due to the image of a loon that appears on the back.
• It is often called a commodity currency due to Canada’s major role in Crude oil exports.

What Is the Swiss franc?

• The Swiss franc is the official currency used for everyday transactions in both Switzerland and Liechtenstein.
• The currency is symbolised by ₣, and abbreviated as ‘CHF’.
• CH represents Confoederatio Helvetica, the country's formal name, while F represents the franc.
• The Swiss franc exhibits characteristics of a “safe-haven” currency because of the country's non-inflationary and stable economy.
• In addition, it is often called the Swissie by forex traders.

Characteristics of the CADCHF Currency Pair

• As of 2024, the CADCHF currency pair ranks 25th among the most traded currency pairs in the world.
• The currency pair also accounts for 0.58% of total FX turnover.
• CADCHF is regarded as a minor forex pair because it does not constitute the US dollar.
• CADCHF typically features lower liquidity and trading volumes compared to major currency pairs.
• The currency pair has carry trade properties due to significant differences in interest rates.

What Is CAD/CHF Trading?

On various forex trading platforms, the ticker symbol used to represent the exchange rate of the Canadian dollar (CAD) to the Swiss franc (CHF) is denoted as CADCHF. In this exchange rate representation, CAD is the base currency and the CHF is the quote currency. This indicates that, at every point in time, the CAD/CHF value reflects the number of Swiss Francs needed to purchase one Canadian dollar. Therefore, as both currency values fluctuate, the CAD/CHF exchange rate will change relative to the strengths and weaknesses of both currencies. This presents opportunities for traders to speculate on the price movement of the CAD/CHF pair. If you anticipate the Canadian dollar (CAD) to appreciate relative to the Swiss franc (CHF), you may open a long position on a CAD/CHF financial instrument. In contrast, a short position on CADCHF implies that you expect the CAD to depreciate relative to the CHF. Therefore, it is important to understand the factors influencing the price movement of the Canadian dollar and the Swiss franc.

What Driving Factors Affect the CAD/CHF Exchange Rates?

When trading the Canadian dollar (CAD) to Swiss francs (CHF) currency pair, several factors can impact the CADCHF exchange rate. They include:

Central Bank Policies: Monetary policy decisions in Canada and Switzerland play a significant role in the CADCHF exchange rate. Any adjustment in interest rate by either central bank can influence the relative demand of each currency and ultimately, the exchange rate.

Economic data Report: Macroeconomic reports concerning Canada or Switzerland's economy can significantly affect the CADCHF exchange rate. Major examples of such data releases are inflationary figures, the Consumer Price Index (CPI), Gross Domestic Product (GDP), and employment reports.

Political events: Beyond economic figures, the CADCHF exchange rate is also susceptible to political influences. Given the strong trade ties between Canada and Switzerland, along with Canada being a major investment destination for Switzerland's capital, political events such as elections, referendums, and trade agreements in both countries can impact currency valuations. These factors can influence investor sentiment and, consequently, the demand for each currency.

Market sentiment: Investor risk appetite plays a significant role in the CADCHF exchange rate. During "risk-off" periods, when investors are risk averse, the Swiss franc (CHF) tends to strengthen. This stems from the CHF's role as a safe-haven asset for investors seeking stability during uncertain times.

What Institutions Influence the CAD to CHF Trading?

Some institutions play a major role in influencing the CADCHF foreign exchange market.

The Bank of Canada (BOC)

As Canada's central bank, the BOC is entrusted with maintaining price stability and a healthy financial system. A key tool in achieving these objectives is monetary policy, which involves setting interest rates. The BOC communicates this policy stance eight times a year at scheduled meetings, with the potential for additional communication during unforeseen events.

Swiss National Bank (SNB)

As the central banking system of Switzerland, the SNB is entrusted with maintaining price stability and a monetary environment that fosters economic growth. The SNB releases its rates and accompanying monetary policy statements quarterly. However, it may hold events outside scheduled dates that can heavily influence its monetary unit.

Statistics Canada

Canada's national statistical agency plays a crucial role in providing objective data on the country's social, demographic, economic, and environmental landscape. Data provided by this government agency include employment rates, consumer price indices, retail sales reports, and data on major commodities like crude oil. These statistics offer valuable insights into the health of the Canadian economy.

Swiss Federal Statistical Office (FSO)

The FSO (Federal Statistical Office) of Switzerland publishes a wide range of reports on various aspects of the country, including the economy, population, and social well-being. Some major reports to be aware of by the FSO are Gross Domestic Product (GDP), Consumer Price Index (CPI), labour force data and trade of balance.

How to Trade the CADCHF CFDs

Forex CFDs offer traders the opportunity to speculate on the price movements of currency pairs without ownership of the underlying currencies. Contracts for Difference (CFDs) are financial agreements established between traders and CFD providers. These agreements are cash-settled based on the differential in the opening and closing price of a trade.

In the context of CADCHF CFDs, you do not need to own either currency. By strategically placing long or short positions on CAD/CHF CFDs, traders can realise either profit or loss from the price differential in the entry and exit points of the trade.

What Are the Trading Hours for CADCHF CFDs?

The currency market operates Monday to Friday except on weekends. Furthermore, traders can track CADCHF price movement in real-time and trade the CADCHF CFDs directly from the Plus500 App or WebTrader platform. CADCHF trading is available continuously, starting Sunday at 10:00 PM CET to Friday at 10:00 PM CET.

*Please note that trading platform hours depend on the individual operator.

CADCHF Trading Strategies

Strategies that can be used to trade a minor forex pair like CADCHF include the following:

Trading CADCHF Trends: This strategy emphasises identifying the prevailing directional bias of the CADCHF market and then establishing positions that align with that trend. Traders can leverage technical analysis tools, such as moving averages, trend lines, and various indicators, to assist in identifying these trends. For instance, if technical analysis suggests an upward trend in the CADCHF exchange rate, traders might choose to enter a long position on the currency pair.

Trading CADCHF Ranges: This strategy involves identifying defined ranges in the CADCHF market and then buying the CADCHF at a defined support level or selling the CADCHF at a defined resistance level. For example, if the CADCHF price movement is currently within a defined range, then traders can buy CADCHF as its price approaches the support level or sell as the price approaches a resistance level.

Trading CADCHF Breakouts: Traders can utilise a variety of technical analysis tools, including support and resistance levels, chart patterns, and various indicators, to assist in recognising potential breakout opportunities. By way of illustration, if the CADCHF exchange rate decisively surpasses a key resistance level, traders might choose to buy the currency pair.

Trading the News: Traders analysing the CADCHF market often rely on significant economic events and data releases in order to capture significant price swings. In this case, economic calendars serve as a valuable tool for fundamental analysis and identifying upcoming news events with high potential.

CADCHF Carry Trading: The CADCHF market offers a unique opportunity for traders to profit from the interest rate differential between the CAD and CHF through carry trading. This strategy is based on the premise that a currency with a higher interest rate will typically appreciate compared to a currency with a lower interest rate. For the CADCHF pair, Canadian interest rates are usually higher than Swiss interest rates. This can present a potential profit opportunity for traders to enter long positions on the CADCHF.

Steps to Buy and Sell CADCHF CFDs With Plus500

To trade CADCHF CFDs, take the following steps:

1. Open a CFD trading account.
2. Log in to the Plus500 WebTrader platform on desktop or mobile.
3. Select CADCHF CFD from the ‘Forex - Minor’ category in the instruments section.
4. Analyse the CADCHF price movement and decide whether to buy or sell.
5. Determine your contract size and risk management specifications.
6. Lastly, click "Place Order" to confirm your buy or sell trade.

Ethical Practises for Trading CADCHF

Besides having a well-defined CADCHF trading strategy. Here are some helpful guidelines that may improve your CADCHF trading.

1. Monitor Commodity Market Trends: Keeping track of crude oil prices and other major commodities can provide insights into potential movements of the CAD.


2. Stay up to date with economic data releases, geopolitical developments and market sentiment from both Canada and Switzerland.


3. Utilise the different chart types, chart patterns and technical indicators to perform thorough technical analysis.


4. Ensure proper risk management when trading the CADCHF. This involves setting the appropriate stop loss order, position size and leverage sizes for each trade based on the size of your trading account.

Conclusion

The CADCHF currency pair, representing the exchange rate between the Canadian dollar ‘C$’ and the Swiss franc ‘₣’, is a significant reflection of the economic ties between Canada and Switzerland. The Canadian dollar, which is a commodity currency, became the official currency of Canada in 1871. On the other hand, the Swiss franc, which is regarded as a safe haven, was established as Switzerland's sole currency in 1850.
Trading the CADCHF pair involves understanding its characteristics as a minor currency pair, including the key factors and institutions influencing the CADCHF exchange rate. This data, alongside implementing the right trading strategy and guidelines is essential for traders looking to capitalise on the price movements of the CADCHF currency pair.

Frequently Asked Questions:

When Does CAD/CHF Experience Increased Volatility?

CAD/CHF is known to be most volatile during the overlapping hours of the European and North American trading sessions.

When Can I Expect CAD/CHF Economic Data Releases?

Key economic releases impacting CAD/CHF often occur between 2:00 a.m. and 5:00 a.m. ET, and between 8:30 a.m. and 10:00 a.m. ET.

Is CAD/CHF a Good Pair to Trade?

The CAD/CHF can be a good pair to trade due to its unique characteristics and the economic relationship between Canada and Switzerland.

What Role Does Oil Play in CAD/CHF Trading?

As Canada is a major oil exporter, the price of oil can significantly impact CAD/CHF. Higher oil prices generally strengthen the Canadian dollar against the Swiss franc.