Technical Swing Setup on USD/CHF – No Trade

No Trade: 2012-06-01 05:15 ET

It seems to be the story of my Q2 performance as the market went my way without the pullback I was looking for. Check out how USD/CHF played out during this week’s risk-off bonanza!

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

PCDPOD20120528.review.png

For the third time this quarter (out of 6 trade ideas), it looks like the market moved my way without the pullback I was hoping for. As we can see on the 60 minute chart above of USD/CHF, the Greenback continued to rip higher as investors and traders around the globe mostly ran to the safe haven of US assets as the Euro crises seems to be reaching its tipping point.

Even Mr. Draghi himself told the European Parliament that the ECB is reaching the limits of its powers, emphasizing that the union had become “unsustainable unless further steps are undertaken.” Folks, it doesn’t get anymore serious than that.

With USD/CHF already way beyond my profit target, and with the weekend quickly approaching, it’s safe to say the probability of my orders getting triggered this week is highly unlikely. I will close all of my open orders to go long USD/CHF. No trade.

So, what could I have done differently? Well, with this being the third time I get the direction right but the entry wrong, I will definitely do more market entry orders. Of course, I will limit my risk by not going in with a full position, but scale into a full position with market and limit orders. Hopefully, this adjustment will help me out in the coming weeks to help salvage this disappointing quarter for me, and I’m pretty confident it will since I’ve done well this year going in at market (3:1 win ratio).

Well, that’s it for me today as we have the US Non-Farm Payrolls report coming up soon in the US session. I like to stay away from this bad boy for the most part, and today will be no different. For those of you who do decide to trade it, please be very, very, very careful when entering into the market, whether it be through a market or limit order, right after the numbers come out. Good luck and good trading! Stay safe!

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Trade Idea: 2012-05-28 04:00 ET

Good morning forex friends! The trend is your friend, right? And right now I see a nice looking technical setup on USD/CHF that may get me in that recent Dollar bullish move higher at a sweet price.

PCDPOD20120528.png

To start out this week, I’ve got my eyes on playing the current bullish Dollar trend at a better price if we see a pullback . Looking at the 60 min chart of USD/CHF above, we can see the pair is trending higher, but currently pulling back after reaching .9600. I’ve highlighted how the market reacted to the major psychological area of .9500 in the recent past (which happens to be a Fibonacci retracement area), first drawing in sellers on that first test and then breaking higher on the second test. Is this area now support, where buyers could potentially jump on the trend at a better price? Possibly.

Fundamentally, the economic outlook is still not-so-great around the globe, with the European crisis still at the center of it all. We’re even seeing weakening data from China and the US in recent weeks, pushing traders and investors into the safety of US debt assets and the Greenback.

And today, we got word from Swiss National Bank (SNB) President Thomas Jordan that capital inflows are being considered by the government to stop the franc from strengthening. This could have a broad based affect of weakening the Swiss franc in the short-term, and hopefully a positive effect for my USD/CHF long. Given these new developments, and the fact that the fundamental story of debt crisis/austerity/slowing global growth hasn’t changed, I’m going to go long USD/CHF at the potential support area shown in the chart above. Here’s what I am going to do:

Long USD/CHF half position at .9516, stop at .9400, profit target at .9600

Long USD/CHF half position at .9460, stop at .9400, profit target at .9600

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 an average entry price of about .9488, and if both positions are entered, a potential return-on-risk of about 1.27:1. Of course, with so many different issues around the globe, sentiment can shift on a dime, so be sure to follow our Forex calendar for important upcoming events on both currencies.

Also, be sure to follow me on Twitter and Facebook for updates and adjustments in case I see a sentiment shift and adjust my orders/position on the fly. Good luck, good trading and thanks for checking out my blog!

2 comments

  1. Jedster

    Due to the lack of vol in the EURCHF, the USDCHF is almost perfectly inversely correlated with the EURUSD so this trade is literally just like taking a short in the EU. Given the euro crisis at the moment, that might not be a bad idea, but the EU could rally or fall further and this trade will be directly affected by it. If vol returns to the EURCHF then it is a completely different situation, otherwise, if you want to trade the potential weakening CHF, perhaps trade the EURCHF as there is almost no downside (with the SNB cap in place).

    Reply

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