Selling USD/CHF on a Pullback – Closed

Trade Closed: 2013-10-31 6:10 ET

A wicked week of volatility for the Dollar, one that saw enough volatility to get in and out of my trade much quicker than anticipated.

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 1 hour chart review

USD/CHF 1 hour chart review

I didn’t think the market would get up there, but USD/CHF made it’s way higher on broad USD buying ahead of the FOMC monetary policy statement. I’m not sure why, but traders around the block think it’s mostly profit taking ahead of the major tier one event.

After being triggered to go short, .9000 managed to draw in sellers and the pair slightly reversed from there the day of the FOMC meeting. Because it was a tier one event from the US during an unprecedented time, I decided to adjust my position by closed half manually at .8965 and move the stop on the remaining position to breakeven. I thought that because of the US government shutdown, we’d get some dovish rhetoric on the economy and maybe a statement on how far they’d hold off tapering. When the time came, they did all the opposite of my expectations: didn’t mention the US government shutdown and its economic effects, less dovish economic outlook, and no hints to the end of QE. To read more about the event, check out Forex Gump’s forex blog review of the event.

The reaction was understandably US Dollar bullish, with USD/CHF popping back up above .9000, stopping my remaining position out at breakeven.

1st half: +35 pips
2nd half: +00 pips
Total: +17.5 pips/ +0.22% gain

A really small gain on the day, but I’m glad I adjusted the way that I did. Recent data, especially the weak September US jobs data, made it seem like we’d get dovish talk from the Fed, which is why I left half on instead of taking it all off. I wouldn’t have done anything else with this trade differently.

Well, that’s all for today and with this new information and the market’s reaction to it, I’m looking to switch to a USD bullish bias. Since it’s now the end of the week, I’ll be looking for day trades, so stay tuned for new ideas and observations by following me on Twitter and Facebook!

Trade Idea: 2013-10-28 7:00 ET

Good morning! It looks like forex traders went into USD selling mode last week after the delayed US jobs data came out weaker-than-expected. I think USD/CHF may be an opportunity to play the trend.

USD/CHF 1 hour chart

USD/CHF 1 hour chart

In my last blog post, I pointed out a consolidation/breakout setup on USD/CHF forming. It looks like that’s exactly what we got as the delayed September US employment data came out weaker-than-expected, sparking a big move lower to the next major psychological level at .8900. Now, traders are thinking “no Taper” for 2013, which means we may see bearish pressure on the Dollar in the short-term.

After two weeks of USD selling, a pull back is a realistic expectation, especially as we close out the month and traders take profits. The forex calendar is full of tier 1 data this week that could push the Greenback lower from current levels, but I’m going to play it conservatively for now until I do see the data. Here’s what I am going to do:

Short half position USD/CHF at .9000, stop at .9080, max profit target at .8600.

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

With this trade structure, I’m only risking 0.50% of my account, with a potential return-on-risk of 5:1. .8600 is the next major support area, and if .9000 continues to hold as resistance, sellers to could easily play the pair down to that area. Needless to say, this may turn into a longer-term position if it goes my way.  If I’m wrong, I cut out quickly above the previous consolidation for a very small loss.

Of course, anything can happen in the forex world, so if the story changes, I’ll be sure to quickly change as well. Stay tuned for updates and adjustments by following me on Twitter and Facebook! Good luck and good trading!

  • BIJOY

    I still believe and waiting for an another test of 0.9150

    • Pipcrawler

      Thanks for you thoughts Bijoy. Why do you think it will make it go back up there?

      • BIJOY

        Former supports, Resistance and in line with a falling trend line. Also right now stochastic in 4 hour is leaving the oversold area signaling a bullish move. Unable to post chart. Earlier we were allowed to post charts in DISQUS and now the new style won’t provide any option to post charts.

        • Pipcrawler

          Yeah, I’ll ask about the ability to post charts in comments to our tech guys. Thanks Bijoy and I’ll keep your thoughts in mind 🙂

  • Orchid

    I agree with BIJOY, see Daily chart there are RSI and MACD Divergences there and price recently bounced from channel floor headed for 0.91 and it has gone half of its way and also 0.89 is a hard support last week with big dollar selloff it did not break sorry for my weak english, good luck

    • Pipcrawler

      Thanks for pointing out the technicals on the Daily chart! And please don’t apologize for you “weak” english. I think it’s pretty good! For me, .8900 – .9100 will be a battle zone area to watch. It could go either way with risk sentiment and Fed policy dominating the headlines.

  • Pipcrawler

    Closed half of my short USD/CHF position ahead of the FOMC statement to lock in some profit and move the stop on the remaining position to breakeven. Watching and waiting.

  • so can we consider the formal fomc statement about the monetary police will make huge impact on the market trading

  • Pingback: Reflecting on My Q4 2013 Performance | Forex Blog: Pick of the Day()