Seasonal Sector Trades: Swiss Franc Mid-Summer Rally By: Jeffrey A. Hirsch & Christopher Mistal | August 03, 2017 | Email | Print

The Swiss franc correlates well with gold’s price moves. Gold is generally strong in this time period, so traders may want to watch this relationship between gold and the Swiss franc. The “Swissie”, which is the trader talk for the currency, has been a safe haven currency in the past, especially during times of financial and geopolitical instability. Due to Switzerland’s neutral stance and ability to close its borders, it has been well protected, as history shows.

 

 

However, under normal market conditions, the “Swissie” does demonstrate some repeatable patterns against the U.S. dollar. One tendency for a relatively predictable move is in August. Traders want to go long this seasonal best trade on or about August 8 and hold until right around mid-October. In the 42-year history of this trade, it has worked 29 years, for a success rate of 69.0%. This trade’s worst loss, in 2011, was the result of central bank intervention and could have been avoided through the use of technical indicators or a basic trailing stop loss.

 

 

The chart above shows the front-month, continuously linked, non-adjusted Swiss franc futures weekly price bars on top and the line in the lower pane shows its 42-year average seasonal price move. Seasonal strength beginning in early August and lasting through mid-October is shaded in yellow. Last year this trade was profitable in the early stages, but faded as the U.S. dollar began to rally ahead of Election Day. This year the Swiss France has been steadily climbing higher as the U.S. dollar has been in a downtrend since peaking in early January.

 

 

CurrencyShares Swiss Franc (FXF) is an easy and cost effective way to execute this trade outside of the forex market. FXF has just under $160 million in assets and an expense ratio of 0.40%. Trading volume can be on the light side at times, but does pick up nicely when the Swiss France makes a move. 

 

Currently, Stochastic, relative strength and MACD indicators are negative. FXF had a brisk run from just above $94 in mid-May to over $100 in mid-July. Since mid-July, FXF has pulled back and appears to be looking for support. FXF could be considered on dips below $97.00 with corresponding signs of improvement from its technical indicators. If purchased, an initial stop loss at $95.25 is suggested. This trade idea will be tracked in the Almanac Investor ETF Portfolio.