Forex Trade Idea: 2014-12-08
Starting off the new trading week with a simple technical setup on USD/CHF. With the short-term trend higher, is a pullback a good time to go long?
Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.
The U.S. dollar through the second half of 2014, and the future looks somewhat bright thanks to recent positive U.S. data, including a big surprise from the most recent U.S. jobs report. Any positive data adds fuel to speculation that we’ll get a rate hike from the Federal Reserve, which I think could support U.S. assets including the Greenback. On the other side of the pair, we’ve got the Swiss National Bank monetary policy meeting this week, and with Europe still seeing weakness and the SNB in defense mode of the Swiss franc rising too quickly, it’s a low probability of bullish commentary for a franc rally.
And on the four hour chart above, I see a simple technical setup to use as a framework for entering long some U.S. dollar as a great price. USD/CHF recently broke a resistance area around .9700, and when resistance areas are broken, the tend to draw in buyers if the market drivers have not changed. This area lines up with a couple of arguments for buying support: a rising trendline created off of higher lows and rising moving averages that can serve as dynamic support. I look to enter in that area with a wide max stop (one weekly ATR, and hoping to ride up the trend to a major psychological level not seen since 2010. Here’s what I’m doing:
Long USD/CHF full position at .9700, max stop at .9525, max profit target at 1.0000
I’m only risking 1.00% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 2.2:1. Of course, anything can happen in the forex markets, so if the story changes or that support area doesn’t not hold, I’ll be sure to reassess, adjust, or close down the trade quickly if necessary. Stay tuned by following me on Twitter and Facebook!