Historically, Switzerland remained neutral throughout the major European conflicts. This earned Switzerland a place as banker to the world, as even the most loyal industrialists and politicians of the major combatants wanted their money somewhere safe during the fighting, to prevent a catastrophic loss of funds in the event of a catastrophic loss of territory. Today estimates place one-third of the world’s private assets within those locked vaults and safely behind those strict privacy laws.

According to the December 2007 Bank for International Settlements’ Triennial Central Bank Survey, approximately 6.1% of all forex trading market turnover occurs in Switzerland, comparable to Japan’s 6.0% and Singapore’s 5.8%. Although that figure is dwarfed by the United Kingdom’s 34.1% and the United States’ 16.6% shares, it’s sufficient to ensure that market liquidity during Switzerland’s banking hours is high enough to cause significant currency movements.

Also according to the BIS, the Swiss franc (CHF) is on one side or the other of approximately 6.8% of all forex transactions. USD/CHF accounts for 5% of all market turnover and EUR/CHF another 2%, making it the fifth most actively traded currency in the world.

Because Switzerland is so intimately connected, politically and through international trade, with the Eurozone, their economies tend to parallel each other, in the same manner as New Zealand and Australia, and Canada and the United States. This tends to create strong positive correlation between the Swiss and Eurozone currencies, currently around 98%.

Currency pair movement and the number of market orders have an inverse relationship, with larger amounts of trader traffic requiring longer periods of time to sort through the forex trading system. Therefore, CHF’s lower market share, coupled with its strong correlation with the higher-volume EUR, means that CHF and EUR tend to move in the same direction but CHF gets there first. This makes USD/CHF an excellent leading indicator for EUR/USD and traders not actively interested in USD/CHF tend to watch it for the guidance it gives regarding the immediate short-term movements of the most actively traded currency pair in the world.

Another interesting tendency of CHF is its respect for support and resistance levels. The Swiss tend to be an orderly people with an adventurous mountaineering streak to their natures, and the Swissie tends to be an orderly currency, turning regularly at technically indicated levels but often spiking through them first, as illustrated below by the current one-hour chart of USD/CHF:

This respect for support and resistance tends to extend over long time frames, with the Swissie turning repeatedly at such levels month after month, as illustrated by the current four-hour chart of EUR/CHF, below:

The range-bound nature of the Swissie makes it one of the easier currencies to trade, while its strong movement within those ranges, as shown in the EUR/CHF illustration, above, makes it highly profitable for those traders who master its nuances.

Fundamentally speaking, USD/CHF is mostly driven by economic announcements within the U.S., but EUR/CHF responds to both Swiss and Eurozone data. Both pairs are most active at the times when their banking hours overlap, or during the London session.