Page 56 - Ultimate Guide to Currency Trading

This trying time brought a rapid increase in the EUR/CHF exchange rate in favor of the Swiss
franc. The Swiss National Bank thought it would be best to use its power and reserves to bring the
franc to a more manageable price level. The methods used by the bank worked for a while, and the
price of the franc lowered against the euro. The pressure became too great and the SNB gave up the
fight: The Swiss franc continued its climb to record levels against the USD and the EUR.

This process, while rare, is called intervening in the markets. It is not a good idea to trade into
an FX pair while a central bank is intervening in the markets, as the force of such intervention can be
massive and sudden! Just the idea that a central bank will get into the markets should be a warning to
you to stay clear of that currency until notice that the intervention has stopped. Most of the time with
a floating rate currency regime, an FX pair will move up and down as the market moves. These are the
best currencies to trade. Their movement is smooth, and can be tracked and predicted through
fundamental analysis.