Checking out USD/CHF this week ahead of the latest monetary policy statement from the Swiss National Bank, and on the recent broad strength in the U.S. dollar.
USD/CHF Uptrend Play
In case you missed it, the Greenback has been kicking butt and taking names recently, rallying higher against the majors this week despite the massive stimulus from the Fed (including cutting interest rates down to a 0.00% – 0.25% range). Besides the usual “safe haven” demand for Greenbacks and U.S. assets, the recent strength likely stems from issues of companies around the world not having U.S. dollars to do business. Of course, we don’t know how long these conditions will last, but it is likely that they won’t be turned around any time soon as long as global economies continued to be damaged by the coronavirus pandemic.
On the other side of the pair, the Swiss franc has been a relative out performer in March due to the extreme coronavirus fears and market selloff, but we may see some weakness this week when the Swiss National Bank gives their latest monetary policy statement.
It’s likely they’re not happy with the franc’s recent rise, which raises the odds of some stimulative action / currency intervention rhetoric from them this week.
With those themes in mind to likely influence USD/CHF the most this week, I’m looking to build a long position. But the pair has already made a strong move higher, and with stochastic signaling potentially over bought conditions, I’m going to play it safe with my entry strategy by scaling in from current levels down to the rising ‘lows’ pattern on the one hour chart above. Traders may see this as another buying opportunity in a trend, especially if the themes discussed play out.
My stop will be roughly one daily ATR from my second entry in case we see a big pick up in volatility, and my profit target will be the next swing high for a solid short-term potential return-on-risk. Here’s what I’m going to do:
Long half position USD/CHF at market (0.9605), max stop at 0.9380 with 0.50% risk, max target at 0.9800
Long half position USD/CHF at 0.9505, max stop at 0.9380 with 0.50% risk, max target at 0.9800
I’ll be risking 1.00% of my account if both positions are triggered with a potential 1.65:1 return-on-risk. If the SNB doesn’t give traders massive stimulus or currency intervention news and the franc rallies, then I may adjust (close out full or partial position / cancel orders / roll stop) to limit or lower my max risk. If the a favorable scenario and market reaction plays out, then I’ll look to add to the position and possibly turn it into a longer-term position.
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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