Talk about a shaky start to Q3 2016! Thanks to Shinzo Abe’s stimulus plans, the Greenback shot higher against its lower-yielding counterparts.
Original Trade Idea: USD/CHF’s Falling Channel Retest
A few days ago I shorted USD/CHF at market when the pair tested a falling channel resistance that hadn’t been broken since November last year. Fundamentally, I banked on the Brexit vote nudging Janet Yellen and the rest of the FOMC members into delaying their rate hike plans, which would then weigh on the dollar.
I considered closing my position after the better-than-expected NFP release, but second-guessed myself after seeing a mixed picture in the details. It also didn’t hurt that the channel resistance wasn’t broken amidst the volatility.
The straw that broke the camel’s back was Shinzo Abe announcing that he would launch another stimulus package to boost Japan’s economy. See, the prospect of “helicopter money” boosted USD/JPY so much that it took USD/CHF along with it. The focus shifted (though not completely) from Brexit and the Fed’s rate hike schedule to Japan getting more stimulus.
On a technical basis the pair has finally broken above the resistance area with the former channel looking like the textbook resistance-turned-support level. I also didn’t like that the 1-hour chart is showing a pretty solid uptrend supported by a trend line and the 100 and 200 SMAs.
I closed my positions at market (.9852) and saw a 119-pip (0.22%) dent on my account.
A pretty shaky start, but thankfully not as disastrous as it could have been. One thing I probably could have done is to close the trade at .9800 yesterday when the pair hit the trend line and the SMAs on the 1-hour chart and marked an official resistance-turned-support-like bounce on the 4-hour time frame.
But on to the next trade! I’m currently on the lookout for a good setup to trade this week. Got any ideas?