Before I head out for the weekend, I decided to get back in the Greenback after positive U.S. data & USD/CHF holding at a rising trendline.
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With oil and risk sentiment making a small comeback and the idea of an aggressive interest rate hike schedule from the FOMC less of a reality, the Greenback has understandably fallen out of favor in the past few months. This is all a reaction to the latest market developments, but in the grand scheme of things, the U.S. is the only major economy with plans to raise interest rates on the back of positive developments in U.S. economic data. This makes me selectively bullish on the U.S. dollar over currencies linked to weaker economies and easy monetary policies, like the one from the Swiss National Bank (wants to see a weaker franc and open to currency intervention).
So, I think there will be buyers in the Greenback out there and now may be the time to take a nibble in USD/CHF as the pair retests minor support that held in February, and a rising trendline linking higher lows that goes all the way back to the first quarter of 2015. Also, the stochastic indicator is showing potentially oversold conditions, another argument that the recent bounce may have legs.
Given that the technical and fundamental pictures align, and on the possibility the FOMC may surprise us with upbeat rhetoric in their April meeting, I’m going to take a nibble here at current prices, with another order set to go long on a pullback to the major psychological level (.9500). My max stop is one weekly ATR below that level, and no max profit target, but I’ll look to adjust around the next area of potential interest, which was a battleground for buyers and sellers back in the day between 2008 – 2009. Here’s what I’m doing:
Long half position USD/CHF at market (.9776), max stop at .9275, adjustment target at 1.0800
Long half position USD/CHF at .9500, max stop at .9275, adjustment target at 1.0800
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 4.4:1 if both positions are triggered. 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!