AUD/CHF has been slowly moving lower on the higher timeframe but staying within a pretty tight range for the last couple of months. Looking to play the trend on a top of range retest.
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This is mainly a technical setup with hopefully a little help from this week’s forex calendar. This week we’ll get a few potential catalysts, most notable are the KOF Economic Leading indicator for the Swiss franc and the quarterly producer price index data from Australia. Of course, I have no idea what those numbers will be, but I think the recent weakness in China’s economy and markets, as well as the gold markets, will likely continue to put pressure on the Aussie in the short term.
Technically, the pair seem to have found support around the previous swing low of .6950, so hopefully there’s a bounce higher to play the longer-term downtrend at a better price. I think that better price may be .7100 since it has been a strong area of previous resistance. My stop is the next major psychological handle, but if .7100 doesn’t hold I’ll look to cut early, and my max target is the major psychological level. But if the minor support levels hold on a retest, I’ll look to take profits early. Here’s what I’m doing:
Short AUD/CHF a quarter position at .7100, stop at .7200, max profit target at .6900
I’m only risking 0.25% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 2:1. Of course, anything can happen in the forex markets, so if the story changes I’ll be sure to reassess and adjust quickly if necessary. Stay tuned by following me on Twitter and Facebook!