Consolidation Break on USD/CHF? – Trade Closed

Trade Closed: 2013-01-26 07:05 ET

Good morning! There wasn’t much movement in the market all week, but thanks to strong German data I was able to close out with a small profit before the weekend.

Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.

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My chart review above pretty much says it all as we can see the pair hung around .9300 all week, up until Friday when we got news of upcoming big repayments from banks under the ECB’s LTRO program. We also got a positive surprise from the German IFO data; both events sparked risk-on sentiment during the morning European trading session.

USD/CHF broke through the strong support we saw at .9280 all week, and with the weekend quickly approaching, I decided to lock in profits. I manually closed at .9233 just ahead of the US session.

Total: +47 pips/ +0.24% gain

There was much to reflect on on this trade as there really wasn’t much movement all week. I did contemplate closing my position when European PMI’s disappointed on Thursday, but since USD/CHF didn’t move much higher, I thought that there really wasn’t interest in the market to be risk averse. It looks like that decision was a good one as I would have missed out on the positive news on Friday.

Well that’s it for this week and it’s time to enjoy the weekend. Thanks for checking out my blog and I hope you all had a great week in the markets. See ya next week!

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Trade Idea: 2013-01-22 06:45 ET

Good morning forex friends! I’m playing USD/CHF this week on a consolidation-break pattern, with help from today’s positive European data. Does it have the legs to move lower?

pcpod20130122.jpg

As we can see from the 60 minute chart above on USD/CHF, the strong bear candle is signaling the market may be ready to move out of consolidation. This is sparked by today’s positive surprise from Europe as the ZEW Surveys post big surprise numbers (31.5 vs. 12 forecast from Germany), signaling a big improvement in sentiment. This move towards risk taking we’re seeing today, and US Dollar selling, could be further pushed along with news of a new tranche of emergency aid for Greece.

For the rest of the week on the forex calendar, I think likelihood of further selling out of the US Dollar could be sparked by eurozone service and manufacturing PMI this Thursday. Forecasts are for better-than-previous month numbers, and if we get a big surprise to the positive side like we did today, we may get enough momentum for USD/CHF to the strong support area around .9130.

For now, I’m hopping in at market with a small position, with a stop above the meat of the recent consolidation area. My max profit target is the strong area of support around .9135. Here’s what I am doing:

Short half position at market (.9280), stop at .9375, max profit target at .9135

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

This trade structure gives me about a 1.5:1 potential return-on-risk of about 0.50% of my account. I look to hold this position through the week, but of course, if the story changes I’ll look to adjust quickly. Stay tuned by following me on Twitter and Facebook. Thanks for checking out my blog…good luck and good trading!