Pick of the Day: USD/CHF – Update

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12/19/2006 – 10:37 pm EST

As expected, USD/CHF continued to drift lower and is now currently trading approximately at 1.2115. For those of you who stayed in the trade – good job! But, as we approach the Euro trading session, you may want to limit your risk by adjusting your stop loss, closing part of your position, or closing your trade all together. I would close part of my position, adjust my stop to 1.2130, and target 1.2095. Euro session can get volatile and you wouldn’t want to lose your winnings to some whipsaw action. So, +25 pips for those who closed their trade with me at 1.2125, and good luck to everyone else still in the trade!

12/19/2006 – 03:37 pm EST

It looks like pt1 was hit on our trade for +25 pips, and then reversed back to our entry. I had half of my position automatically close out and moved the stop of the second half of my position to breakeven. Unfortunately, I was stopped out on the second half, so no more pips for the day.

For those still in the trade, you can move adjust your stop to reduce your risk or move it to breakeven. It’s up to your discretion. With today’s weak rally and then reversal in the dollar, it looks like today’s data was no help for Greenback bulls. There will be no significant data until Thursday and Friday, so we will probably continue to see USD drift lower throughout the rest of today’s session and through the Asian trading session.

12/19/2006 – 8:46 am EST

We just saw surprises to the upside in both the US CPI and US Housing Starts numbers, which led to a quick boost in the dollar. Now, it’s still early and the market hasn’t fully digested the data, but after taking a quick look at the underlying data, I’m still going short the dollar.

While US Housing Starts had a great headline number of 1.588 million versus the forecasted 1.550 million, Permits dropped 3.0% to 1.506 million – the slowest since December 1997. Also, the September Housing starts was revised lower.

US Producer Prices was surprisingly up 2.0% versus the forecast of 0.4%. The core number came in at 1.3%. We will probably see this number trend higher as the price for raw materials have been increasing.

After the release of the reports, USD/CHF shot up and found resistance at 1.2200. It is currently trading around 1.2185 price area. In the longer term, I like a short at 1.2200 and target of 1.2000, but for the “Pick of the Day” we will short if the pair reaches 1.2200 again and target the 61% Fib retracement line at 1.2125.

Short 1 lot USD/CHF at 1.2200, stop at 1.2245, pt1 at 1.2160, pt2 at 1.2125

If the pair continues to drop without hitting 1.2200 then we will:

Short 1 lot USD/CHF at 1.2150, stop at 1.2190, pt1 at 1.2125, pt2 at 1.2100

Please remember to never risk more than 1% to 2% of your account on any one trade – even on demo accounts! Adjust your position sizes to this rule accordingly. Good luck and good trading!

12/19/2006 – 8:20 am EST

We have both the US Producer Price Index and Housing starts numbers coming out at 8:30 am EST. Both of these reports are projected to give soft numbers, so any surprise to the upside should cause a quick boost to the dollar. Right now I’m looking at a range play, but I won’t have specific entry points until the numbers are released. So, stay tuned!