Shorting USD/CHF at .9000?

After cutting out a bit too early in USD/CHF a couple of weeks ago, I’m refocused back on the pair.  With another break below .9000, will the sellers remain in control?

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

USD/CHF 4 hour forex chart

USD/CHF 4 hour forex chart

Fundamentally, it’s a bit cloudy as to what’s driving this pair lower, especially after another positive NFP release last week lead to further USD selling across most of its major counterparts. Based on the reaction, it looks like traders are playing good economic news as a cue to get out of the Greenback, regardless of the chances of a December or January Taper rising.

For now, I’m gonna go with that cue since select data points from several of the world’s major economies (notably Europe and China) are starting to point to a brighter outlook for 2014, or at the very least, finally out of the “crisis” territory that we’ve seen over the last few years. We also recently received news of an agreement for a budget deal that would avoid another US government shutdown situation in January; this brings a bit of certainty and positive sentiment to the markets as well.

Technically, the pair is retesting a strong support area around .8900 that was last tested and held in late October. And after the strong trends we’ve seen since the beginning of November, it would not be out of the question to think this move is out of steam; the stochastic indicator sure seems to indicate so. So, I look to short the pair on a pullback and retest of the major psychological handle, with a stop in the range of one full weekly ATR. My soft target is the recent lows. Here’s what I am doing:

Short 1/2 position USD/CHF at .9000, stop at .9150, profit target at .8850

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t follow what I do. Risk Disclosure.

I’m only risking 0.50% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of 1:1.  If triggered and the market moves my way, I’ll reassess and possibly adjust my target/add another position if the momentum to the downside is strong.

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!

3 comments

  1. ForExchange

    Hi Pick of the Day,

    until now works your Longer-term suggestion very well. Do you still think that the currency-pair will still end up around the 0.9000 value?

    Have a nice Weekend,

    ForExchange

    Reply
      • PipcrawlerPipcrawler Post author

        I closed my orders ahead of the FOMC decision. Looks like a bad decision at the moment after USD/CHF touched .9000 and found resistance, but it’s the end of the year and I definitely don’t want to be short Dollars after the Taper for now.

        Reply

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>