Position Play on USD/CHF – Trade Closed

Trade Closed: 2012-03-20 03:30 ET

No luck for my position trade attempt on USD/CHF as Friday’s weak US data crushed the Greenback’s recent gains.

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

PCDPOD20120314.review.png

On Friday, weak US data killed the chances of the Greenback to put up further gains. We saw the University of Michigan Confidence number come in below the previous month’s read (74..3 vs. 75.3), Capacity Utilization weaker (78.7% vs. 78.8% previous), and Industrial Production also weaker (0.0% vs. 0.4% previous). But the real catalyst was the weaker-than-expected US CPI numbers, most notably the core number as it came in weaker-than-expected against both the forecast and previous read. (0.1% vs. 0.2%). For some traders, weaker inflation may mean the economy needs a boost; possibly QE3 from the Fed? Very Dollar bearish.

That Dollar weakness sentiment continued on Monday as risk appetite grew and the need for a safe haven fell, pushing the Greenback lower against the Swiss Franc to my stop out level at .9095 on Monday’s session.

Total: -105 pips/ -1.0% loss

In retrospect, I still think my longer-term outlook on the pair is a viable argument until we see confirmation for more quantitative easing from the Fed. It just got caught in short-term catalyst surprise that took it beyond its average weekly volatility range of just over 200 pips. Sometimes the markets just roll that way, and in hindsight, I probably should have cut out earlier after realizing what that CPI number may mean to traders.

For now, I think that minor support area, around .9120, is a good area to watch now, as a consolidation-break play is setting up at the moment.

That’s it for now, but the week is still young and there’s an opportunity to pick up pips every day. Stay tuned for new ideas and updates by following me on Twitter and Facebook! Good luck and good trading!

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Trade Idea: 2012-03-14 05:43 ET

Good morning forex friends! It’s been a hot minute since I’ve put on a long term position play, but I think the time has come as the stars align, IMHO of course, for USD/CHF to move higher. Check it out my ideas and see if you agree…

PCDPOD20120314.png

Fundamentally, my arguments for USD/CHF to rise are pretty simple:

1. The FOMC left the benchmark rates steady as expected yesterday. While minute, this does give the Greenback the interest rate advantage. Also, the Fed’s economic outlook for the US was positive, keeping the idea of another round of quantitative easing on the back burner for a while.

2. The Swiss National Bank (SNB) is expected to keep the central bank rate at 0.00% this Thursday, as well as the ceiling on any Swiss Franc’s strengthening they started back in August. The rhetoric alone has kept Swissy bulls away, and probably will continue to do so until at least the next SNB meeting after this week’s.

In my mind, these are the two driving themes for the pair (for now), and with hopefully a little bit of pull back on its recent strengthening, I’ll get a chance to jump in long at a good price.

On the 4 hour chart above, I’ve marked various levels of recent interest as they may attract buy/sell orders once again in the future. I’ll be watching these areas to potentially add to my long position if they hold after being retest.

For now, we saw just the market break above the .9200 area, but with divergence showing, the rally from .9000 may be out of steam and pull back. If it does pull back, I’ll be going long. My target will be around the highs hit earlier this year in January, and my stop will be half the weekly ATR. Here’s what I am going to do:

Long USD/CHF at .9200, stop at .9095, profit target at .9500

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Risk Disclosure.

This trade structure gives me a potential 3:1 return-on-risk, potentially more if I decide to scale in as I mentioned earlier.

As always, if the market environment shifts on a new catalyst (since this is a longer term trade, it probably will), I’ll be sure to adjust my open orders or open position quickly. Be sure to follow me on Twitter and Facebook for updates. Thanks for checking out my blog…good luck and good trading!

  • Michael Viton

    also not for the pull back is a completion of an Bearish ABCD pattern.  This completed at ~.9377.  AB = CD perfecty and the time frame was perfect.  pulled back exactly at D.
    4hr chart

  • MedicalChew

    I’m in on this one too. Also noticed there’s an inverse head and shoulder.

  • Mattspips

    I’m looking for a buy here too, but around the 0.9100 area, being previous support in the past and at a Fibonacci level from the Feb 28 through March 06 rally.  If that fails, I’ll look for a buy around 0.9000, if that fails, a buy at 0.8940, and if that fails, it would probably be time to re-think the bullish stance. 

  • Schnitzel

    nice trade

  • Costarica

    well, not our luck..it got burned badly..

  • Christopha

    I’m climbing on

  • Kristopher

    if you entered that mean you could have gotten 50+ pips