I’m throwing up another simple setup onto the books with this drop in GBP/CHF setting a up a potential long opportunity into a recent uptrend. Will buyers come back?
Fundamentally, I’ll take the pound over the franc as U.K. data has been surprisingly more good than bad, despite the overhang of the Brexit situation going on. In the month of May, we saw positive reads for the U.K. on business sentiment, net lending, and inflation, while from Switzerland, it’s almost the opposite as PPI comes in negative, business sentiment ticks lower, and the unemployment rate ticks higher. Combine that with the interest rate differential still in favor of the British pound, I’m all for buying this pair up.
In terms of price action, the pair recently had a nice run higher to almost 1.3100, moving up over +7% since bottoming out in the middle of March around 1.2200. We’re seeing a pretty strong pullback now that still has momentum, so I’m goona wait for a little more pullback before taking a nibble.
I threw up the Fibonacci retracement tool on the recent swing move, and I see that the 50% retracement level lines up with the recent strong resistance level around 1.2650, which could draw in buyers again if re-tested. So, I look to go in there with my usual two daily ATR stop, and I’ll target the recent swing high for a good potential return-on-risk. Here’s what I’m doing:
Long half position GBP/CHF at 1.2650, max stop loss at 1.2450, target at 1.3050 for a potential 2:1 return-on-risk.
I’ll be risking only 0.5% of my account on this position and I’ll look to re-assess to potentially reduce my risk and maximize my gain if I’m triggered and the market still has strong upward momentum around that 1.3000 handle.
As always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.
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