EUR/CHF: Waiting for the Neck to Break – Trade Closed

Trade Closed: 2013-02-07 03:33

EUR/CHF Chart

That was a close call! Thanks to positive economic data as well as improved risk appetite, the euro rallied hard on Tuesday, allowing EUR/CHF to rise back above the neckline support of the double top. The good news for me though, is that I set a pretty wide stop, which gave my trade enough breathing room.

Now, however, with the ECB rate statement just around the corner, I think it would be prudent to close out my position, as there’s just too much event risk at hand. Yes, there lies the potential for ECB President Draghi to mention something about the value of the euro or for him to comment on the state of Spanish and Italian politics, but it’s just too risky for me.

I’ve decided to close my position at market (1.2323), leaving me with a small loss of -15 pips / -.07%.

Just a tiny hit to my account, but I think its worth taking rather than subjecting my position to event risk. After the ECB rate statement, I’ll have to survey the markets again to see if any other solid setups emerge!

For those of you who are holding on, I hope you already thought of that while creating your trading plan! Good luck to everyone!

Trade Update: 2013-02-06 02:40

Things are going according to plan so far, I just hope that the final leg of my trading plan works out too!

EUR/CHF Chart

Thanks to some better-than-expected reports from the euro zone and an overall risk-supportive environment, EUR/CHF managed to rise high enough to give me a decent entry.

Just as I had predicted, price climbed back up to test the neckline at 1.2340 near the 50% Fib level yesterday, and boy did this level hold like a boss. I didn’t hesitate to sell at market after I received confirmation from some spinning tops and a bearish divergence. Here’s how I set it all up:

Sold at market (1.2308), stop loss at 1.2420, profit target at 1.2180.

I set my stop loss just above the recent swing high, which I think should give this trade more than enough leeway, especially since it’s above the 1.2340 neckline. As for my profit target, I placed it right around September 2012’s highs, which is the nearest area of interest to the south.

I know this trade doesn’t exactly have the best reward-to-risk setup (just a little over 1:1), but I think it’s worth a shot. I feel like the euro could come under intense selling pressure in the coming days, what with political issues popping up in Spain and Italy. Besides, I personally think it’ll be hard for the ECB to top its unexpectedly upbeat rate statement last month when it makes its announcement again tomorrow.

In any case, I’m keeping my risk in check by putting just 0.5% of my account on the line. So even if this trade doesn’t work out, my account won’t take a big blow.

What do you guys think? Will EUR/CHF keep falling?

Trade Update: 2013-02-05 02:40

EUR/CHF Chart

That’s why it pays to wait for the break and pullback! If I had set my orders just below the support level, I would have gotten triggered last week but I would have also gotten burned!

EUR/CHF only finally broke and closed below the support level at 1.2340 yesterday, as the euro experienced a sharp sell-off across the board.

Apparently, concerns about Spanish Prime Minister Rajoy’s potential resignation have rocked the euro. Rajoy is currently being hit with allegations of corruption, which of course doesn’t bode well for stability in the region. Coupling this with the upcoming Italian elections, its no wonder that the euro bulls are taking a break.

So for now, I’m going to wait for a retest of the former neckline. I threw up a Fibonacci and what do you know, the 50.0% Fib lines up nicely with the 1.2340 former support area!

Hopefully we see a small pullback and so I can sell this sucker at a nice reward-to-risk ratio!

Trade Idea: 2013-01-24 02:01

EUR/CHF Chart

I know I can’t be the only one who spotted this setup!

Buyers have been loading up on Swiss francs like it’s going out of style, and in doing so, they’ve managed to form two tops!

I think it’s only a matter of time before this pair takes a nosedive. Why? Well, double tops usually precede strong bearish moves, and I think the fact that the “second top” is lower than the first suggests that EUR/CHF doesn’t have enough steam to rise any higher.

Besides, the euro’s rally has been an absolute monster on the charts against its other counterparts (USD, JPY, GBP), and I feel that it’s due to retrace soon. I mean, c’mon, look how extended those moves are! When the time comes for the euro to head down the charts against these pairs, there’s a chance that the drop could be magnified against the Swissy. It might just serve as a catalyst for a break of the double top neckline.

So what I plan to do now is to wait for this pair to break and close below 1.2340, but I’m not gonna short it on the breakout, no sir! I’m gonna wait for it to retest the neckline as resistance because doing so will give me a better reward-to-risk ratio. Plus, I find that it’s not uncommon for price to retest a level after it has been broken.

So that’s my game plan for this week. It might take a while before the setup materializes, but I think it offers a setup that’s worth waiting for. Remember, patience pays!

What do you guys think? Does anyone else plan on trading this pair? Do you think support at 1.2340 will hold?


  • Fitz

    I’m with you again on this one. Trade looks solid. Good luck to us! 😀

    • cyclopip

      Thanks man! I’m actually looking to close now ahead of the ECB statement. You holding on?

      • Fitz

        Might move my stop to BE first, then hold. But if you decide to close, I’ll close half of the lots on my end, and then hold the rest.

      • Fitz

        Decided to close all the lots for +30pips. I was able to enter my short at a better price, and I think the upcoming ECB rate statement can cause too much volatility. Thanks again for this trade idea.