The EUR/USD–USD/CHF correlation trading strategy is a method that takes advantage of the historically strong inverse relationship between the EUR/USD and USD/CHF currency pairs. Traders who understand this correlation can spot high-probability trade opportunities, confirm market moves, and identify early signs of reversals or continuations.

EUR/USD–USD/CHF correlation trading techniques offer a structured way to analyse forex markets with greater confidence and improve trade timing by observing how the two pairs move relative to each other.

Why Are EUR/USD and USD/CHF Inversely Correlated?

• US Dollar Connection:
  Both pairs involve the US dollar — in EUR/USD it is the quote currency, while in USD/CHF it is the base currency.
• Safe-Haven Effect:
  The Swiss franc (CHF) is often a safe-haven currency, which can slightly alter the correlation during periods of risk aversion.
• Inverse Correlation:
  When the US dollar strengthens, EUR/USD typically falls and USD/CHF rises.
  When the US dollar weakens, EUR/USD typically rises and USD/CHF falls.

In short, EUR/USD and USD/CHF usually move in opposite directions because of their structure and the flow of the US dollar.

How to Trade the EUR/USD–USD/CHF Correlation Strategy

Step 1: Monitor the Correlation Strength

• Use a forex correlation table.
• Ideally, look for a correlation around -0.8 to -1.0.

Step 2: Identify Divergences

• Watch when EUR/USD and USD/CHF fail to move inversely.
• A divergence may signal an upcoming correction.

Step 3: Choose Your Trading Approach

• Divergence Reversal:
  If EUR/USD and USD/CHF stop moving inversely, look for a reversion back to their normal behaviour.
• Trend Confirmation:
  If both pairs behave inversely as expected, use one to confirm trades in the other.

Step 4: Confirm with Price Action

• Look for technical patterns:
  • Breakouts
  • Reversals (pin bars, engulfing candles)
  • Continuation patterns

Step 5: Set Entry, Stop Loss, and Take Profit

• Entry:
  After price action confirms the divergence or continuation.
• Stop Loss:
  Logical stop below/above recent swing high or low.
• Take Profit:
  Next support or resistance level or fixed risk-to-reward of 1:2 or better.

Step 6: Manage the Trade

• Move stops to breakeven when in profit.
• Exit partially if volatility increases significantly.

Advantages of EUR/USD–USD/CHF Correlation Trading

1. Reliable Confirmation
Cross-checking trades with another major pair increases trade reliability.

2. Exploits Market Inefficiencies
Temporary disconnections between the two pairs often lead to profitable corrections.

3. Simple and Logical Approach
Clear rules based on visible relationships.

4. Higher Probability Trades
Inverse movements provide double confirmation.

5. Works Across Multiple Timeframes
Scalping, intraday, and swing trading all benefit from correlation analysis.

Challenges of Correlation Trading

Correlation May Weaken During Crises
Strong risk aversion can distort normal relationships.

Requires Quick Reaction
Divergences and corrections can happen fast.

High USD Exposure
Both trades expose you to the US dollar — manage risk carefully.

News Volatility
US or Swiss news can impact the correlation unexpectedly.

Simple Example of a Correlation Trade

Element	Example Details
Correlation Strength	-0.92
Divergence Observed	EUR/USD rallies strongly while USD/CHF holds flat
Setup	Short EUR/USD or Buy USD/CHF expecting realignment
Entry	After bearish engulfing candle on EUR/USD
Stop Loss	Above recent swing high
Target	Next support zone
Risk-to-Reward Ratio	1:2 or better

The trader uses the divergence between EUR/USD and USD/CHF to set up a high-probability trade.

Best Practices for EUR/USD–USD/CHF Correlation Trading

• Always Confirm with Price Action:
  Never rely on correlation alone.
• Avoid Overtrading:
  Stick to clear, strong divergences or confirmations.
• Stay Alert During Major News:
  News affecting the USD or CHF can cause unusual movements.
• Use Logical Position Sizing:
  Be mindful of double exposure to USD risk.
• Focus on Major Timeframes for Reliability:
  1-hour, 4-hour, and daily charts give cleaner signals.

Common Correlation Trading Mistakes to Avoid

Mistake	How to Overcome
Trading minor divergences	Focus only on significant divergence events.
Ignoring market news	Always check for upcoming high-impact news.
Assuming correlations are static	Monitor correlations regularly — they shift over time.
Relying only on correlation	Combine correlation with strong technical setups.

Avoiding these mistakes ensures stronger and safer correlation trading.

Examples of Correlation Trading in Practice

• EUR/USD and USD/CHF 1-Hour Charts:
  EUR/USD breaks support while USD/CHF breaks resistance — trend continuation confirms high-probability entries.
• Daily Divergence Example:
  EUR/USD rallies strongly while USD/CHF does not fall — signals a potential reversal in EUR/USD.

Both examples show how the relationship between these pairs can be used to find excellent trades.

Conclusion

Trading is about probabilities and confirmation. By mastering EUR/USD–USD/CHF correlation trading, you add a powerful layer of analysis that increases trade confidence, reduces false signals, and helps you profit from real-time market inefficiencies.

If you are ready to master forex correlations, sharpen your multi-pair analysis skills, and trade like a professional, explore our Trading Courses and start trading correlations with precision today.