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Sterling could be in for a round of higher volatility in the upcoming Thursday trading session, making this simple technical setup on GBP/CHF a potential short-term play for quick pips.

GBP/CHF Fib Short Play

GBP/CHF 1-Hour Forex Chart
GBP/CHF 1-Hour Forex Chart

For today’s idea, I’m going with a technical setup on GBP/CHF for a potential short-term position. On the one hour chart above, we can see the pair has been trending lower over the past week, but saw a strong bounce in today’s trade.

That brings the pair to the Fibonacci retracement area of the swing move lower from 1.2118  down to 1.1870, which also happens to be in line with the falling trendline the lower ‘highs’. And we also got a signal of potentially overbought conditions according to the stochastic indicator, altogether making a strong technical argument for short-term resistance to form in this area.

From a fundamental perspective, we may see action in Sterling from the upcoming Flash PMI updates from the U.K. during the Thursday London trading session. With recent U.K. economic data being pretty weak (e.g., UK inflation hits 1.5% as lockdown begins to biteUK employment growth slowed in March as COVID began to hitUK shopping trips plummet and housing market freezes after lockdown), the odds are highly likely better than even we’ll get sour sentiment from the business sector tomorrow.

With that in mind, Sterling could take a dip in the next session or two, so I’m looking to take a short-term short on the event to see if I can grab some quick pips ahead of the weekend.

My plan is to take a nibbler short at current market prices with a stop above the Fibonacci retracement area marked on the chart above. My target will be almost three times my risk, which is a reachable target by the end of the weekend (based on the daily ATR of around 140 pips) if the U.K. truly disappoints and if we see a rise in global risk aversion sentiment before the weekend.  Here’s what I’m doing:

Short half position GBP/CHF at market (1.1979), max stop at 1.2080 with 0.50% risk, max target at 1.1700

I’m only risking 0.50% of my account on this trade, and I’ve got a potential return-on-risk of around 2.78:1. I will look to add to this position /go for a bigger target depending on what we get from the PMI data/market reaction to increase my profit potential, as well as cut the trade early if the events do not go my way. 

What do you guys think? Are you watching GBP/CHF for a potential short position as well? Let me know in the comments section below!

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.