Forex Trade Idea: Is USD/CHF in For More Gains?

Now that I’m out of my EUR/USD trade, I’m setting my sights on a potential retracement on USD/CHF’s chart. What do you think of this forex setup?

On a technical basis USD/CHF is hugging the .9900 major psychological area, which is near a previous resistance AND a 50% Fib retracement on the 4-hour chart. Of course, it also doesn’t hurt that Stochastic has just reached its oversold levels.

USD/CHF: 4-Hour Forex Chart

USD/CHF: 4-Hour Forex Chart

Fundamentally I’m still all for buying the dollar. Pip Diddy tells me that this week has been good for U.S. economic reports and are supporting calls for a Fed rate hike next week. On the other side of the trade, the Swiss National Bank (SNB) is expected to do something in reaction to the ECB’s bombshell last week. Maybe a bit of jawboning or similar moves to help weaken the franc? If you haven’t visited your forex calendars, you should know that the SNB is publishing its latest policy decisions tomorrow. Gotta make sure you’re ready!

Though the divergence between expectations of the two central banks sounds like a good bet right now, there are a couple of scenarios that might affect my trade. For one thing, traders could have already priced in a Fed rate hike in December. This might open up USD/CHF for a possible buy-the-rumor-sell-the-news situation much like what happened in EUR/USD right after the ECB added to its stimulus program. This is why I have put a WIDE stop loss on the trade and only risked 0.5% of my account. Here are the deets:

Bought 0.5% worth at market (0.9935) with a 200-pip stop loss at .9735.

Initial profit target is at its previous highs near 1.0300 though I can adjust depending on how the pair reacts to the SNB’s decision tomorrow. I’m also open to putting my stops at break-even if I see that I have profits to protect before the SNB and Fed events.

What do you think of this setup? Is this something you’d take for yourself?

XOXO,

Huck

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