GBP/CHF has been in a strong uptrend since bottoming out back in the Summer, and the recent pullback may be an opportunity to play the trend & my long bias.
Trade Idea: GBP/CHF Pullback Long
Fundamentally, I’m definitely more bullish on Sterling over the Swiss franc, mostly on the recent positive data that’s been coming from the U.K., all of which lead to an interest rate hike from the Bank of England earlier in November–the first hike in a decade.
Of course, developments in Brexit is definitely an “x factor” for Sterling, but I gotta be bullish on the pair on the interest rate divergence (which may widen according to SNB’s Maecheler) and the current risk-on environment off of the global growth recovery, which usually isn’t too kind to safe haven currencies like the Swiss franc.
Looking forward, there aren’t many catalysts to derail this line of thought for a while until we see SNB Chairman Thomas Jordan speak next week on monetary policy and the week after when we get fresh top tier U.K. data and the BOE’s inflation report to Parliament.
In terms of price action, the pair has been in rally mode since bottoming out during the Summer around 1.2300, now trading between 1.2900 – 1.3300 in the last couple of months. We just got a pullback after the BOE’s dovish hike, but it looks like buyers took back control on another test of the 1.3000, which is around the previous area of interest highlighted in the chart above.
With stochastic indicating the recent bounce may be a little bit overdone, I’m looking to short on a pullback to that strong area of interest and if there are no new catalysts to shift my biases between now and then. My stop will be my usual one ATR stop and I’m keeping a pretty open target now since the pair seems to be in a strong uptrend. But I’ll look to re-assess and adjust my stop at the previous swing high area. Here’s what I’m going to do.
Long half position at 1.3000, max stop at 1.2720, initial target at 1.3280
I’ll be risking only 0.5% of my account on this position and as usual, I’ll look to make adjustments at that swing high, which would likely to be adding to my position/roll down my stop to max out the trade if the momentum is still strong and the Brexit story doesn’t turn sour for Sterling. Stay tuned, good luck and good trading!
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