GBP/CHF: Long-term Descending Channel To Hold? – 203 pips in the bag

Trade Closed: 2013-01-23 00:12

GBP/CHF Chart

The franc was one of the biggest winners yesterday, as it rose against all its major counterparts, including the dollar, euro, and yes, the pound. Apparently, better-than-expected ZEW economic reports from the euro zone also boosted the franc. Keep in mind that since Switzerland is right smack in the middle of Europe, it benefits if its neighbors (like Germany) are on the rise.

In any case, the strong rally by the franc helped GBP/CHF slip past the 1.4800 handle, and the pair eventually retested the 1.4700 MaPs, hitting my profit target in the process! Touchdown, baby!

Profit target hit at 1.4700: +203 pips / +1.25%.

Thank god I went with a wide stop loss and put it above 1.5000 psychological level! If I went the greedy route and went with a tight stop to enhance the reward-to-risk ratio, my position wouldn’t have had enough breathing room!

Congratulations to those of you who were able to take advantage of this setup! Stay tuned for my next trade setup! Hopefully it turns out as successful as this one!

Trade Update: 2013-01-22 02:45

GBP/CHF Chart

Boy, am I glad to see that things are finally going my way!

I got a pretty good scare last week when GBP/CHF rose to challenge the top of the falling channel. But thankfully, I anticipated a retest of the 1.5000 handle, set my stop loss above this level, and narrowly avoided an early exit. Phew! It sure does pay to play it safe!

From then on, it was smooth sailing for me, as risk aversion and crummy retail sales data worked in combination to turn the pound into one heck of a weak currency. December’s retail sales figure was so bad, that it got traders worrying about this Friday’s GDP report. Investors are afraid that the retail sales report is an early sign of weak GDP growth, and they fear another dip into recession, which is why the pound still hasn’t recovered from last week’s tumble.

Right now, GBP/CHF is about 160 pips below my entry price, so I decided to lock in some pips. Can’t let this turn into a loser now, right?

Moved stop to 1.4853 (locked in +50 pips).

Over the next few days, I’m expecting the GBP/CHF selloff to resume, so hopefully we’ll see it hit our profit target before the week comes to an end. In any case, I’ll keep you guys posted! Keep your fingers crossed, guys!

Trade Idea: 2013-01-17 00:10

It’s been a pretty wacky week for the yen pairs, so I’ve decided to avoid them for now and scan through the more exotic crosses for this week’s trade.

GBP/CHF Chart

I stumbled upon this interesting setup on GBP/CHF, which has been stuck within a descending channel for the past SIX months. The good news though is that unlike EUR/CHF, GBP/CHF has actually seen some decent movement, as the height of the channel is more than 200 pips, which makes this pattern very tradeable.

Moreover, while the SNB has promised to keep true to its pledge of maintaining the EUR/CHF peg, this doesn’t seem to have affected GBP/CHF as much. That said, I expect the pair to continue to consolidate within the falling channel for the foreseeable future.

With price recently bouncing off the top of the channel, I’ve decided to short at market.

Short at market (1.4903), stop loss at 1.5020, take profit at 1.4700.

What I like about this trade is that it seems relatively safe, but still offers an excellent reward-to-risk ratio of 1.67. While the setup and the potential reward is enticing, I won’t be betting the farm on this trade – I’ll be risking just 0.75% of my account. Gotta keep those risk management rules in check no matter what!

If you have any comments or suggestions about this setup, feel free to bombard me in the comment box below!

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12 comments

  1. Yap Chin Hoong

    I have a similar setup, I am thinking about a bullish reversal, currently with a retracement to proceed up further.
    I am more conservative in TP at around 1.48000, which is the 61.8% fibo retracement level. :-)
    link to dropbox.com

    Reply
  2. lostos

    I think it’s going to start moving sideways in a range between 1.4693 – 1.4982. You can see that the pattern has stopped making new lows.

    Reply

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