Swing Play on USD/CHF Resistance – Close Open Orders

Close Open Orders: 2012-04-26 23:30 ET

Good evening! It looks like my hopes to play USD/CHF were dashed this week as the rest of the market was eager to short the Dollar ahead of the much anticipated FOMC statement.

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

PCDPOD20120424.review.png

Before looking at price action let’s review what the FOMC had to say at this week’s interest rate announcement:

  1. No change to interest rates or their asset purchase program.
  2. Increase optimism in the US economic outlook.
  3. Positive remarks from Bernanke, but warns that strains in the global financial market continue to post significant downside risk.

You can read more details in Forex Gump’s article, “FOMC Review: Fed Leaves Door Open for QE3.”

As I mentioned earlier, traders had USD selling already on the brain as the Greenback weakened across the majors ahead of the FOMC statement. On the 240 minute chart above, this went for USD/CHF as well as there was no retracement to the resistance area above, and no triggering of my short orders. With the weekend quickly approach, I have decided to close my open orders on USD/CHF. No trade.

In retrospect, I had the feeling that I should have jumped in at market, but with my two recent losses, I decided to play it safe for this event. Also, the potential reward-to-risk wasn’t that enticing at market, and the FOMC statement could always surprise in any which way; the potential reward wasn’t worth the event risk to me. In the end, I think I played it as well as I could have.

So, a week with no trade, but that’s okay. I’ve vowed to be more picky with my trades, like a cheetah stalking its prey–the conditions have to be right, right?

That’s it for me. Thanks for checking out my blog and be sure to stop by next week for new ideas and observations by following me on Twitter and Facebook. Have a great weekend!

BabyPips.com USD/CHF Forums
Setting Newbie Expectations
My Favorite Trading Books
BabyPips.com Forex Chatroom
MeetPips.com: Pipcrawler’s Journal
Horn of Africa Hunger Crisis

Trade Idea: 2012-04-24 09:05 ET

Good morning forex friends! For this week’s trade idea, I thought I’d have a setup ready for this week’s very important FOMC statement. It could spark some nice volatility for USD/CHF and a potential retest of strong resistance.

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

PCDPOD20120424.png

This week’s trade bias is based on my homie Forex Gump’s article, “FOMC Statement: 4 Things to Watch Out For.” Be sure to read it as he gave convincing arguments that we may see a more dovish Big Ben this go around, and I agree with him. Also, after the last FOMC meeting, he warned that the US recovery may not be sustainable, and it looks like he may be proven correct with much of the tier one data points for the US coming in weak in the last few weeks. Most notable was the disappointing March jobs data (120k vs. 207k forecast).

So, I’m bearish on the US Dollar in the short term, and as always, I’ll look to play it if I can get in at the right price. For me, the best setup to play is if we see a retest at major resistance on USD/CHF. In the past, the Greenback has fallen against the Swiss Franc on dovish comments or policy changes like quantitative easing. I don’t think we’ll get any policy changes, but I think the dovish comments are probable given the explanation above.

Weak US data or more bad news from Europe could push traders into US assets (in which USD tends to benefit), so we may see the market hit that .9200 ahead of the FOMC meeting. If it does, I’ll short there, place my stop above last week’s high (around .9250) and target the strong support area marked above. Here’s what I am going to do:

Short USD/CHF at .9200, stop at .9290, profit target at .9025

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 return-on-risk of almost 2:1, possibly more if I decide to scale into an open position. As always, if the market environment shifts on a new catalyst (which will most likely happen in today’s crazy market), 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!

2 comments

  1. Pamegafx

    I agree with you I don´t think the FOMC will introduce any policy change in the upcoming meeting. The Fed is likely to recognize the economic weakness in the statement, and add more caution. I think the pair that will have the most impact will be the usdjpy and the usdchf, as safe heavens.

    Reply
    • Pipcrawlerpipcrawler Post author

      Thanks for checking out my blog!  USD/JPY will surely be affected, but that potential announcement from the BOJ for more action to weaken the Yen will be a big factor.  Stay safe!

      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>