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With all that’s going on with crude oil these days, I’m keeping a bearish Loonie bias and looking at this potential CAD/CHF trend setup. However, there’s one technical reason why I’m not hopping in just yet.

Short CAD/CHF Idea

This pair just recently broke below the descending channel support on its 4-hour time frame, indicating that a steeper selloff was about to take place. I’m not that confident about just shorting at market to catch the bearish momentum so I drew the Fibs on the latest swing high and low to spot retracement entries.

Stochastic is pulling up from the oversold area on this time frame anyway, so sellers might be taking a break for now. I’m seeing a possible correction to the .7350-.7400 levels, which is close to the broken channel support.

CAD/CHF 4-hour Forex Chart
CAD/CHF 4-hour Forex Chart

One of the reasons why I’m not to keen to short right away is that I’m seeing a test of a longer-term floor on this pair. On the daily chart, price is right at the bottom of its range between resistance at the .7750 minor psychological level and support at the .7200 handle. I’m thinking that a quick bounce on profit-taking is a possibility before sellers gain more company.

CAD/CHF Daily Forex Chart
CAD/CHF Daily Forex Chart

Stochastic is also indicating oversold conditions on this time frame so I think there’s a pretty strong possibility that support might hold for now. With that, I’m keeping this pair on watchlist mode until I see signs that the downtrend could resume and that bears have enough energy to push for a breakdown.

As for fundamentals, I’m turning bullish on the franc, thanks to mostly stronger than expected reports from Switzerland these days. Besides, the mood seems to be improving in Europe as Macron is slated to win the French presidential elections and U.K. reports are confirming that the economy is staying resilient even with Brexit uncertainties.

Meanwhile, downside pressure on crude oil could continue to drag the positively-correlated Loonie lower as output is expected to pickup in Libya and Saudi Arabia doesn’t seem too eager to extend their production cap deal until the end of the year. Of course I’ll also be keeping tabs on Canada’s upcoming jobs data to see if the currency will get a fresh round of losses.

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See also: Q1 2017 Trading Performance Review

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