Forex Reviews: CAD/CHF and EUR/GBP

Decided to close down my most recent trade ideas early as the technical frameworks are invalidated and sentiment shifts.  Here’s a quick forex trade review.

Long CAD/CHF

Original Trade Idea: Potential Range Play Long on CAD/CHF?

CAD/CHF 4 Hour Forex Chart

CAD/CHF 4 Hour Forex Chart

Since putting my orders on for this trade idea, a lot has gone on with both the Swiss franc and Canadian dollar.

First, the Swiss National Bank made no changes as expected, but forex traders were hopeful that we’d see commentary on possible negative deposit rates to battle a potential deflation scenario. There were may traders short francs going into the event and when the dovish commentary didn’t come, the Swiss franc spiked higher in value.

Second, even after losing almost half of its value in 2014, oil prices continue to drop; oil is making new 2014 lows today with NYMEX crude trading just above the $56/barrel handle.  This hurts oil exporting countries like Canada, which in turn takes a toll on the currency.  Despite some positive data showing a positive turn for Canada, oil weakness is overshadowing everything and may continue to do so in the short-term.

With all of these factors playing out and two support levels being broken on the way, it’s not doubt that my trade is invalidated so I decided to close my trade early at .8282 to limit my losses:

Total: -119 pips/ -0.73% loss

For now, I’m staying away from CAD longs until we finally see a bottoming out in oil prices.  Who knows when that will come but the next support level for oil seems to be the $40/barrel area last seen in 2009.

Short EUR/GBP

Original Trade Idea: Broken Support Retest on EUR/GBP

EUR/GBP 1 Hour Forex Chart

EUR/GBP 1 Hour Forex Chart

Much like CAD/CHF trade above, it looks like sentiment has shifted on EUR/GBP with euro traders potential turning positive, or at the very least, no longer as strongly bearish. It’s not that the economic picture has improved in the euro zone, but after a 8 month fall from just under .8400, euro bears may finally be losing steam. Plus, sentiment has been shifting all year on the British pound as U.K. data comes in disappointing and pushing back rate hike expectations.

Technically, the pair is now above the potential resistance area that I cited as a short entry area and it looks like it’s holding there.  This invalidates my trade idea, so I decided to close this out manually at .7962 to limit my max loss. 

Total: -62 pips/ -0.31% loss

I’m still fundamentally bearish on this pair, but it’s possible that we’ve finally hit way oversold territory on this pair and potentially some profit taking before we head into the end of 2014. For now, I’ll keep this on my watchlist for short-term trades rather than swing and longer term position trades.

Overall, not a great way to finish the year and it especially stings on the EUR/GBP short since it was in profit for a short time before market sentiment shifted.  For the rest of December, I’ll only look for short term setups and I’ve still got my EUR/CHF long which seems to be holding he 1.2000 level, but I may close out before the end of 2014.  Stay tuned!

  • ForExchange

    Hi Cyclopip,

    I also hit myself with shorting the JPY today. It is a pitty for that great CAD/JPY. With the EUR/GBP trade I was a bit more sceptical in the beginning with trading it right before the main support level.

    I am also in the EUR/CHF trade. I think it is still a low risk bet, however the rollover rate hurts every day so I have to think about if it makes sense to hold it and pay the rollover every day when there is just not much sign for improvement. I think I hold it this week and close it before Christmas if nothing happens.

    Good luck for the week,

    FE

    • Cyclopip

      Hey ForExchange…can’t win’em all, and that’s definitely true for me this quarter, which has been a rough ride. I agree that EUR/CHF is a low risk bet, but I’ll probably close the moment I get up to the 1.2030 – 1.2050 range. Wanna go completely flat before the new year.