Keepin’ it simple this week with a textbook range setup on NZD/CHF. As the market approaches a major support area, will the bulls start to take back control?
NZD/CHF Trade Setup
Ever since I threw NZD/CHF onto my watchlist in January, the economic and monetary policy landscape continues to favor the Kiwi over the franc. This is even more true now that we recently got guidance from the Reserve Bank of New Zealand that we may see a rate hike from them by mid-2018. But also since my watchlist post, the Swiss franc has outperformed the Kiwi in recent weeks, likely due to a shift back to risk aversion sentiment ahead of the upcoming European election season, most notably the developments in the French Presidential elections.
This latest move is not enough to dissuade me from shifting my bias away from the Kiwi for now, especially with evidence the SNB may be taking action again to slow down Swiss franc strength, as evidenced by their latest report on their foreign currency reserves showing an increase month over month.
So, I will go ahead and put on a small position if the major support area is retested, with my max stop two daily ATR away from my entry. My max target will be the top of the range, over two times my stop for a desirable reward-to-risk ratio. Here’s what I’m doing:
Long half position of NZD/CHF at .7000, max stop loss at .6870, max target at .7300 for a potential 2.5:1 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 gets back up to the middle of the range.
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.
Going forward, there should be plenty of volatility coming up this month with monetary policy statements from both the RBNZ and SNB, as well as the 2016 fourth quarter GDP read from New Zealand next week. There should be great volatility for both currencies coming soon. Stay tuned!
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