USD/CHF Downtrend to Continue? – No Trade

No Trade: 2012-01-26 15:15 ET

While we didn’t see much follow through in price action during the Asia session, the European session traders were ready to jump in the momentum sparked by the Fed yesterday. Unfortunately there was no pull back higher for USD/CHF and no trade for me.

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PCDPOD20120126.review.png

Not much explanation needed on this one as we can see on the chart above, traders were getting into USD sell mode as soon as Europe opened up for trading. The pair quickly dropped from the consolidation area, avoiding my entry orders and nearly hitting my profit target on the day. I probably should have went in at market like my homegirl Happypip on her AUD/USD trade. With the US session ready to close up shop, I thought it would be time to close my own orders down for the day. No trade.

It looks like we’re seeing a pullback on the USD selloff, but with the Fed decision on rates a new game changer, it is a pull back that may only be temporary. I will continue to look for short opportunities on the Greenback for now until we see a new catalyst in the markets. Thanks for checking out my blog, good luck and good trading!

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Trade Idea: 2012-01-25 18:18 ET

Good evening! I’m looking at a technical setup on USD/CHF that may continue to find support from the Fed’s latest decision on interest rates. Will the down trend continue?

PCDPOD20120126.png

Today was FOMC interest rate decision day, and they did things a bit different this time by extending their pledge to hold its target federal funds rate from 2013 to late 2014. This was a bit of a surprise given the recent positive data from the US, so we got a pretty big reaction in the currencies. We saw a broad USD sell off and it just may continue in the upcoming Asia and European sessions. Let’s remember, these events come out after the European close, so Asia and European traders won’t get a chance to play the sentiment shift until Thursday’s session.

I have the 60m chart up above, and we can see the pair grinding lower with the lower “highs” and lower “lows.” The saying goes that the “trend is your friend,” so I look to short this pair if we see a bounce higher. I threw up the Fibonacci tool, and I’d like to go short where the Fibs line up with the previous consolidation area as it may have become an area of resistance. My stop will be half of the daily ATR and my target will be a minor support area last seen at the end of November. Here’s what I am going to do:

Short USD/CHF .9260, stop at .9310, pt at .9150

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 2:1 return-on-risk, and because it is a day trade, I am reducing my risk to 0.50% of my account.

As always, if the market environment shifts on a new catalyst, 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!