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CAD/CHF is still chugging along in a range after a strong more lower in at the beginning of August. Is the market about to embark in a new move lower?

CAD/CHF Fibonacci Resistance?

CAD/CHF 4-Hour Forex Chart
CAD/CHF 4-Hour Forex Chart

Canada’s economic calendar is poppin this week with top tier events, so it makes sense to focus on the Canadian dollar for my newest idea. On the four hour chart above, we can see that the pair has been in somewhat of a range over the past couple of weeks after a strong drop at the beginning of August. The selling pressure was likely due to the combination of both global recession fears after bond yields inverted (positive for “safe haven” assets like the Swiss franc) and on a recent string of not-so-good economic updates from Canada (e.g., CA sheds jobs in July, building permits decline, trade surplus decline)

I’m not so sure of what the bond markets are saying now, but as far as Canada’s economic situation, I know that’s something that can’t be turned around right away and it’s likely to continue to show in this week’s upcoming data releases. This all brings up the conversation that the BOC could join the rest of the central bank community in stimulative monetary policy, which would likely continue to put pressure on the Loonie.

So, I’m fundamentally bearish on this pair, and now that we can see the bulls being rejected one more time at the 38% Fibonacci retracement area on the chart above, the technicals are signaling that we may get another small move lower at the very least. With all of that said, I’m taking small positions short to limit my risk because of the upcoming Jackson Hole Summit (you never know what may come out of a meeting between the world’s central bankers), with a max stop above the Fib area, and my max target will be the next major swing low last seen at the end of 2018. Here’s what I’m doing:

Short quarter position CAD/CHF at market (0.7341 ), max stop at 0.7480, initial target at 0.7200 with 0.25% risk

Short quarter position CAD/CHF at 0.7410, max stop at 0.7480, initial target at 0.7200 with 0.25% risk

I’ll be risking 0.50% of my account if all positions are triggered, and my potential return-on-risk is about 1.97:1.  But again, it’s highly likely I’ll exit this trade before the end of the month after reassessing the latest Canadian data and any news from the Jackson Hole Summit.

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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