Technical Short on USD/CHF – Trade Closed

Trade Closed: 2012-10-04 10:00 ET

Good morning! After holding my USD/CHF short position for over a week, and quite a few twists and turns, I think it was time to let this lingering trade go ahead of another potentially volatile NFP report.

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

PCDPOD20120925.review.png

Over the past week, the market has been dominated with by weak manufacturing reports, speculation on a Spanish bailout, and potential for further easing in China, but the market still wouldn’t break out of its range! For USD/CHF, .9330 has been the line in the sand to break, but buyers simply won’t budge. Since that area won’t budge, and with a potentially USD bullish NFP event tomorrow (according to Forex Gump’s latest blog post), I decided to close my position manually for a very small profit at .9340.

Total: +25 pips on half position/ +0.13% gain

In retrospect, I probably should have stuck to the shorter-term trades with all of these events playing around, but the thought of a possible Spanish bailout (very Dollar bearish) and that sweet technical setup was too much to not hold onto that trade. But in the end, I think I made the right decision to close because even as Draghi re-iterated the ECB’s commitment to buying government bonds (conditionally) this morning, Dollar bulls were still standing up tall and limiting the sell off in Greenbacks this morning.

Overall, it was a good setup and thesis I think, but the market just wouldn’t go my way this time. Well, with the US non-farm payroll report coming up tomorrow, I think I’ll sit back and stay flat until the event. For those trading it, remember to stay patient and reduce your risk because NFP always has a way messing us up with slippage and whipsaws.

Thanks for checking out my blog everyone and stay tuned for new ideas. Good luck and good trading!

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Trade Idea: 2012-09-25 05:25 ET

Good morning forex friends! For this week I look to play a technical setup on USD/CHF. Will traders bring strength back to the Swiss Franc?

PCDPOD20120925.png

I’m going with a technical setup as the forex calendar seems to be light on foreseeable, major economic events this week. And while we may not see major moves in this environment, there are enough second tier events to bring a good amount of volatility to play a swing trade.

On the 60 minute chart above, we can see an argument to jump into USD/CHF for a swing short:

  1. Strong downtrend.
  2. Fibonacci retracement levels lining up with minor levels of previous consolidation.
  3. Bearish divergence at the Fib levels.
  4. Rising wedge in a downtrend (debatable).

When you combine all of the factors above, the odds look favorable that the .9350 – .9400 may draw in more sellers to play the bigger trend.

Fundamentally, we may see the Greenback gain a bit further as focus returns back to the European crisis after the global monetary policy changes we saw recently from the Fed, ECB, and finally, the Bank of Japan. But later this week, US data (e.g., Durable goods, Pending Home Sales, consumer sentiment, etc.) is projected to come in weaker than expected. If that’s the case, it may be back to selling Dollars against the Swiss Franc. With that potential scenario in mind, I look to scale into a short position. Here’s what I am going to do:

Short USD/CHF half position at market (.9365), stop at .9510, profit target at .9255

Short USD/CHF half position at .9465, stop at .9510, profit target at .9255

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

If both positions are entered, this trade structure gives me a potential reward-to-risk of about 1.70:1. Of course, surprise events are always lurking around the corner, so I’ll be ready to adjust in case we see something unexpected. Stay in the loop by following me on Twitter and Facebook.

Thanks for checking out my blog…good luck and good trading!

  • credington

    Price has bounced off a major support line and the weekly stochastics indicate an uptrend. MacD is also headed up on the daily. I’m long.

  • sannya wie

    May The Pips always be with you :)

  • pipcrawler

    Thanks for the comments everyone! @d79f1a5dcf1305ec62fec4148fcf803d:disqus @53eb45c7a9f8c538f7fe0e28900b581b:disqus You’re both probably right that USD/CHF may tick higher, which I already mentioned in my analysis and trade plan. I’m playing the longer term trend lower & QE the Fed just put up, so our goals and timeframe may be different. Good luck to us all!

  • Yashwant

    I think we need to go long as this pair is very much inversely co-related with Eur/Usd and we are seeing bearish pattern on Eur/Usd