Taking a short-term shot on AUD/CHF to play recent weakness at a potentially better price.
Short-term Downtrend in AUD/CHF?
On the one hour chart above of AUD/CHF, we can see that the pair recently made strong moves to the downside, likely on a combination of the Coronavirus outbreak in China putting pressure on the Aussie (broad risk aversion and Australia’s close economic ties with China) and recent pressure on the SNB to end the negative rate regime pushing the Swiss franc higher.
The pair seems to have bottomed out at the moment with the price bouncing higher to the Fibonacci retracement area of the swing move lower. Is this another opportunity to short, especially with the Stochastic signaling overbought conditions short-term. I’m ready to go short to play the current driving themes, but I’ll do so conservatively given that we will see Australian CPI and Chinese PMI’s this week. My plan is to set a nibbler order to short at the 61% Fib level, with a stop above last week’s consolidation area and targeting the next major psychological support area. Here’s what I’m doing:
Short half position AUD/CHF at 0.6595, max stop at 0.6675 with 0.50% max risk, max target at 0.6505
Again, I’ll be risking 0.50% of my account for a potential max 1.12:1 return-on-risk. This is meant to be a short-term trade, so I’ll likely cut for a profit earlier, but I’ll also re-assess the idea this week based on fresh developments on the economic front and/or updates from the Coronavirus story. If my orders are not triggered by the end of the week, I will cancel them before the close on Friday.
That’s it for now. Stay tuned for updates and 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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