USD/CHF: Support at .9100? – Hit by the Shutdown!

Trade Update: 2013-10-02 7:12 am ET
Looks like there’s no back-to-back win this time!

Thanks to the stubbornness of the guys in Washington, the U.S. government shut down for the first time in 17 years. That’s around the time when we saw Sandra Bullock in While You Were Sleeping and the FIRST Toy Story movie was released. Ack!

USDCHF

I gotta admit though, that USD/CHF was already trading below the .9100 well before the actual announcement. It was holding at the .9050 area before a small spike downward spike sent the pair to .8992. Boo!

Right now I’m looking at a 100-pip, 0.51% loss on my account. I probably could have limited my losses if I had closed just before the weekend or just after the announcement. Price was still trading around .9050 by then. Gotta be more flexible and vigilant next time!

Trade Idea: 2013-09-25 7:12 am ET

As I mentioned in my Twitter and Facebook updates, my USD/JPY position is already out with a yield of +110 pips and +0.37% of my account. How long will the dollar weakness last though?

I don’t think it will last for long. As Forex Gump pointed out in his latest article, the markets don’t seem to be as worried over the U.S. debt ceiling as in 2011. This can be seen by the lack of rally in gold prices as well as the resilience of USD/CHF and the Dollar Index this week.

USD/CHF Daily Chart

If the U.S. policymakers once again extend the debt ceiling as many are expecting, then we’ll probably see the dollar rally especially against its low-yielding counterparts. I believe that this scenario is likely to happen, so I’m risking 0.50% of my account on a long at the .9100 handle.

I set my stop loss 100 pips away, which is already below February’s low and right around this week’s bottom weekly ATR. My initial profit target is at the .9300 handle near last week’s high for a risk ratio of 2:1.

Since the U.S. government hasn’t exactly done anything yet, I have to be very very cautious on this trade. I can’t emphasize enough the possibility of seeing more USD weakness before we see some strength, so make sure you also read up and make your own analysis if you’re thinking of taking this setup.

In the meantime, suggestions are much appreciated! And thanks to those who gave their two cents on my EUR/USD vs. USD/CHF post.

XOXO,

Huck

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