Risk Aversion Plays on EUR/USD and USD/CHF

Trade Ideas: 2011-6-9 1:42

EUR/USD

EUR/USD Hourly Chart

My first trade idea is to short EUR/USD around last week’s high at 1.4650. As you can see, it lines up perfectly with the 61.8% Fibonacci retracement level. If resistance at the minor psychological handle holds, we could see a head and shoulders chart pattern which the oh-so awesome BabyPips.com School of Pipsology tells us is a trend reversal formation.

I did my homework and read up on Forex Gump’s article on the three interest rate decisions scheduled for today.

I don’t plan on shorting the pair just because no one expects ECB President Jean-Claude Trichet to holler an interest rate hike. I’m thinking that perhaps he won’t sound as hawkish as he was before given the recent economic reports we’ve seen from the euro zone (Forex Gump cited a few in his blog).

On top of that, Pip Diddy discussed in his blog today that Euro Zone, IMF, and ECB officials are still bickering whether or not to give Greece more moolah. Word about further disagreement between the three parties could spark risk aversion once more and send traders flocking into “safe haven” currencies such as dollar.

Don’t worry! I’m not pulling the trigger just yet! I’ll wait for reversal candles (I have my Japanese candlestick cheat sheet handy!) to materialize around the resistance area and for Stochastic to indicate that the pair is already overbought.

If I my trade does get triggered, I’ll probably put my stop above yesterday’s high at around 1.4720 and ultimately aim for support at around 1.4430 (roughly equal to the height of the the head from the neckline).

USD/CHF

USD/CHF Hourly Chart

My second trade idea is on USD/CHF. The pair, after its steep drop a week ago, seems to be consolidating in a tight little 30-pip range. But later today, I’m thinking we could very well see a breakout during the ECB interest rate decision.

Personally, my directional bias is for a downside break since the Swissy has been the strongest performing currency among the majors this year. The problem is I do not know where I should enter.

On the one hand, I could enter right at the break of consolidation below .8350. The problem with shorting so early is that there price will immediately encounter some strong support at .8325. On the other hand, if I sell below .8325, I may end up entering too late and miss out on the move.

In any case, I’ll update y’all on Twitter and Facebook where I decide to sell if the pair does breakout.

What do you think of my trade ideas? Write your thoughts in the comment box below. Thank you!


  • Erik Stenlund

    I am looking these setups a little bit too late. Would have been nice ones if I was not too late

  • Sedeete

    Im checking the exact same spots. Im actually already in usdchf, with same expectation as you. So, yea, liking it.

  • Dean FX Paul

    At least USD/CHF has moved slightly out of its range to the upside.. it’s got to move sometime soon!

  • Lucci22

    I got the same drawings just like you. I’m in with short  for the EURUSD :)

  • Jasoya_FX

    Good ones, I am checking them out too.