USD/CHF: Short At First Sight

Trade Update: 2011-06-23 4:55

EUR/USD 1-hour Chart

After mulling it over, I’ve decided NOT to enter. For one, the slightly upbeat FOMC statement seemed to have caused a major sentiment shift. It looks traders have shifted to dollar bullish, from bearish. Aside from that, there weren’t any candlestick reversal patterns.

As I mentioned in my original plan, I would only pull the trigger IF reversal candlestick patterns (c/o my trusty cheat sheet) appear. And lastly, the rising trend line that I pointed out was convincingly broken.

It was a tad heartbreaking not taking this trade. Good thing I spotted another setup on USD/CHF!

Trade Idea: 2011-06-23 4:55

USD/CHF 1-hour Chart

You know how people tell their stories of love at first sight? Well, it was like that with my USD/CHF trade. But I think it’s more apt to describe my feeling towards the pair as short at first sight.

This is how it happened:

I saw that price was testing yesterday’s high and Stochastic already indicated overbought conditions. Using the Fibonacci retracement tool and connecting Monday’s high to yesterday’s low, I saw that the area where the pair was stalling is also the 50% Fib level.

The rest, as they say, was magic.

Well, there’s nothing really magical about logging in to my account and entering at market (.8422). But eh, you get what I mean.

I also entered an order at the .8450 minor psychological handle, at the 61.8% Fib, in case there are enough bulls to push the pair up and test the falling trend line.

I set my stop at .8480. I’m thinking that if the pair rallies all the way up to this level, resistance at the trend line would’ve already been broken. As for my profit target, I’m aiming for the area around yesterday’s low at .8350.

Shorting USD/CHF seems fundamentally-sound too. Earlier, we saw that Switzerland‘s trade surplus for May surged to 3.31 billion CHF. Analysts had only expected to outpace imports by a mere 1.68 billion CHF.

I know that the dollar wooed in the bulls yesterday, but perhaps the initial jobless claims and new home sales reports from the U.S. will be able to give markets an idea why the Fed downwardly revised its 2011 and 2012 forecasts for economic growth and employment.

To recap, here’s my plan:

I shorted at market (.8422) and I also have a sell order at .8450 with a .5% risk on each position. My stop is at .8480 and my profit target is at .8350 for both.

What do you think of my trade idea? Holler your thoughts by writing in the comment box below, sending me a tweet (@Loonieadventure) or leaving a message on my Facebook wall.

Wish me luck!

  • Cillian Murphy

    I don’t quite understand the rationale of the extra sell at 8450 on the swiss trade. Isn’t there a risk of chasing your losses if this gets triggered?