Cross-Eyeing: EUR/CHF – Trade Update

Trade Update: 2007-01-11 15:00

Our trade was stopped out this morning by whipsaw action for -40 pips. In hindsight, I should have adjusted our stop to weather the event risk that was coming up. We would still be in play and in the money. It’s a revisited lesson that I’m sure we’ve all been through before. I still like a short play on this pair, especially after the ECB held off the interest rate hike and the lack of “strong viligance” rhetoric in Trichet’s comments.

Also, I think the Elliot Wave Pattern is still valid, but we will wait for price action to confirm a move before we jump back in. For now, I am looking to:

Short EURCHF at 1.6085, stop at 1.6125, pt1 at 1.6040, pt2 at 1.6000

if the pair retraces before it falls then:
Short EURCHF at 1.6134, stop at 1.6170, pt1 at 1.6114, pt2 1.6080

Remember to never risk more that 1% of your account on any single trade, so please adjust your position sizes accordingly.

Stay tuned for updates as we sit and wait to see how the market digests the events of today. Good luck and good trading!

Trade Update: 2007-01-11 01:00

Our trade was triggered during yesterday’s Euro session, and the pair has pretty much been range bound since. Market players are obviously waiting for the ECB rate decision and for ECB President Trichet to speak before they make a move. So, we will hold the trade open and adjust our position according to price action. Good luck!

crosseyed chart

Looks we have a really nice Elliott Wave pattern on EUR/CHF. To me, it looks like the pair is currently in a three wave corrective pattern, and it may be heading for 1.6000. We will catch a ride on the “c” wave down, possibly to 1.6000 and catch some pips along the way.

crosseye chart

On the 4hr chart, I drew a Fibonacci retracement and it looks like the pair is currently in between the 61% and 76% Fib levels. We will like price action confirm our analysis and look to short right below the 61% at 1.6120.

Fundamentally, I think traders are short biased as Eurozone economy is projected to slow (yesterday’s weaker Retail Sales a sign of things to come?), but the Euro may stall for now ahead of the ECB rate decision on Thursday. Everyone is waiting to see how “strongly” the ECB remains “vigilant” on inflation. The rhetoric will dictate how soon the market thinks the ECB will raise rates.

So, tonight’s trade is based on the Elliott Wave pattern in EURCHF showing that the pair is in corrective mode, and our short Euro bias in the short to medium term. Here’s a trade idea:

Short EUR/CHF at 1.6120, stop at 1.6160, pt1 at 1.6100, pt2 at 1.6060

Remember to never risk more that 1% of your account on any single trade, so please adjust your position sizes accordingly.

This is a longer term trade idea, so I will update periodically throughout the trade. Good luck and good trading!