Back to USD selling against the Swiss Franc this week? – Stopped Out

Stopped out: 2010-11-16 11:25 am ET

PoD Chart

My trade orders were triggered as the Greenback rallied against the majors on a renewed focus on European debt issues. Unfortunately for my trade, and the EU, these worries have intensified, pushing USD/CHF to my stop out level.

The sentiment shift on the Greenback has been building as market speculators think QE2 won’t spark inflation, Ireland’s bailout request is imminent, and on today’s news that Austria threatens to halt Greek Aid. Risk aversion is definitely back on the table as equities, high-yielding currencies, and commodities see a broad sell off against the Dollar.

Through all this my two half position orders were triggered at .9700 and .9800 to create a full position with an average price of .9750, and while we did see momentary resistance at the Fib levels, it wasn’t enough to stop the sentiment shift. My trade was stopped out at .9870,

Total: -130 pips/ -1.0% loss

What could I have done better? For the most part, I thought everything about my plan was sound based on last week’s sentiment. The only thing I could have done better was to recognize the sentiment shift and cut out of the trade early, but that’s always a hard call these days as sentiment seems to shift every week, if not every single day. But then again, that’s the nature of the markets–always uncertain and ever changing.

Overall, good plan, good execution, but not so good a job of shifting with the changing sentiment and I paid a small price for it. As always, something to work on as my goal is to improve something every single day.

Thanks for checking out my blog, good luck and good trading!

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Trade Idea: 2010-11-08 3:51 pm ET

PoD Chart

Now that the madness of last week’s flood of major events are past us, we have a clearer picture of where the Greenback will go…Or do we?

Last week the Fed announced an additional $600B to buy treasuries into mid 2011, the Republicans took the House of Representatives (virtually guaranteeing nothing will get done in Washington), and a few central banks decided that further monetary easing just wasn’t for them. In fact, the RBA raised interest rates one more time to fight rising inflation in Australia.

We also got jobs data from around the globe, most notably the surprise positive data from the US, but weaker housing market data as pending home sales slipped in September.

So, better jobs, weaker housing, and more quantitative easing (QE) in the US. With other central banks holding off on further QE as the Fed basically tells the world it looks to print the Greenback into oblivion, it does look like a dollar bearish environment to me.

And while I like the Euro, the British Pound, or the Japanese Yen as an anti-dollar trade vehicle, I think I’ll pick the Swiss Franc this week as each of the aforementioned countries have their own growth and massive debt issues to worry about.

So, I have the four hour chart of USD/CHF up above, and we can see the pair currently retracing higher after a strong impulse move lower last week. The longer term trend is down, so I threw up a Fibonacci retracement tool to find potential resistance areas. It looks like the area between .9700 – .9800 looks like a good bet, especially as the top of that range was an area of interest as an active support and resistance level last week. With the stochastic not yet showing overbought conditions, I think we may see the market get up there.

Now, because we can’t always pinpoint the exact turning point, if it even does turn, I look to scale into a short position in that range. Here’s what I am going to do:

Short half position USD/CHF at .9700, stop at .9870, pt at .9500

Short half positions USD/CHF at .9800, stop at .9870, pt at .9500

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly.

This week is lacking any top tier events from either country on the Forex calendar, so pay attention to any shift in global risk sentiment as we get rhetoric ahead of the G-20 Meeting, as well as China Trade Balance data this week. Stay tuned and good luck…thanks for checking out my blog!

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