The Swiss Franc (CHF) has long been treated as a safe haven currency. With a relatively stable economy, and a financial system that houses the world’s money (individual, corporate and government).
This was until September 6, 2011 with the introduction of the EURCHF minimum exchange rate peg to counter the effects of a strong CHF which was hurting the Swiss economy by making its exports costlier for foreign consumers.
The strength of the CHF can be seen in the nearly 5000 pip gain the CHF had made over the EUR since the 2008 global meltdown.
The SNB pegged the minimum exchange rate for the EURCHF at 1.2000 with a promise to defend the peg by using “unlimited amounts” of the Swiss Franc to purchase other major currencies.
Now while this has removed the safe haven status of the Swiss Franc, it has not lessened the trade interest in this currency. In fact, it has brought about a redefinition of the way to trade the EURCHF.
Sadly, the binary options brokers are not enthused with this minimum exchange rate peg and so many of them have taken this pair of their asset trading list. So if you had hoped to be able to trade the strategy we will talk about below as binary options, you are going to be disappointed. But like we always say, a little money in your pocket is better than nothing at all. Look at this trade as money you can make for a fuel refill for your car once in 2 months.
Trading this Opportunity
The exchange rate peg has served to create a very strong support region at between 1.2020 and 1.2060 as traders start exiting long CHF positions on this pair if it gets too uncomfortable close to the peg. This is very visible on the daily chart.
The very strong support line for the EURCHF
This throws up an opportunity to buy at the support in order to benefit from what I may refer to as the “peg bounce”. All I need to do is to wait for the price action to approach the 1.2020 to 1.2060 support regions, then enter LONG on the EURCHF and wait for some time for the trade to unravel itself.
This trade is not a quick trade. It sometimes takes weeks to bounce off from this support level, but it is something the trader can look forward to happening with all certainty. See the chart below for the illustration of the EURCHF peg bounce.
As it is, there is no point lamenting the action of the Swiss National Bank. Your job as a trader is to discover how to turn any trade into your advantage and this is exactly what this simple strategy will do for you on the EURCHF.
