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Good morning! It’s another case of the missed trade as USD/CHF pulled back only slightly before moving higher on recent Dollar strength. With major events coming quickly, it’s time to avoid event risk.

Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.

Looking at the chart above, it looks like USD/CHF is already closing in on my profit target, and with the weekend and major events about to hit the wires (the MPC just announced another 50B GBP to its QE program), it’s time to close my open orders to buy USD/CHF and move on to another trade opportunity. No trade.

Overall, I’m pretty happy with everything and I think it was the right choice to look for a pullback given the optimism on risk at the beginning of the week. It was just unfortunate that USD/CHF only dipped to about .9512 before buyers jumped in–missed by a measly 12 pips!

That may be it for me today, but I may have a day trade idea for the Non-Farm Payrolls report tomorrow. If I do, I’ll be sure to put my thoughts out there, so stay tuned to see what I’m thinking. Thanks for checking out my blog…good luck and good trading!

Trade Idea

Good morning forex friends! Now that I have that rough second quarter behind me, I’m ready to rock out the rest of 2012! USD/CHF has to potential to get it started right on a potential retest of a major psychological level. If retested, will it hold?

Fundamentally, I’m still long US Dollar biased for a few reasons:

  1. I still believe we’ll see risk-off moves thanks to the EU debt crisis. Like my man Forex Gump, I think the risk-on sentiment after the EU Summit may not last.
  2. Recent weak PMI from around the globe may also put pressure on risk-on traders. We saw weak PMI from pretty much EVERYWHERE, even the US, indicating a global growth slowdown. This does add on more fuel to the fire for QE3 (the Dollar killer), but I’ll hold off on buying into that thought until Ben says it himself.
  3. It’s summertime and I think pairs will range without a huge catalyst. Without something like a highly anticipated QE3 mega bomb, it’s likely we’ll see low volatility conditions play out as uncertainty continues to reign and traders take a holiday from the market madness. .9500 – .9700 looks to be the established range to play for now.

So, the positive risk-on sentiment from this weekend’s EU summit may carry USD/CHF to .9500, and I think it’s there we may see USD bulls jump back in. In case it pushes it further, I’ll be scaling into a long position with .9450 as my average entry price. My stop will be below this week’s ATR range, and my target will be just under the June high. Here’s what I am going to do:

Long half position USD/CHF at .9500, stop at .9350, pt at .9650

Long half position USD/CHF at .9400, stop at .9350, pt at .9650

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Risk Disclosure.

If both positions are entered, this trade structure gives me a potential return-on-risk of 2:1. Also, this will most likely be a medium-term play for me, so I’ll hold into the weekends if the trade still makes sense.

Of course, anything can happen in the markets and if sentiment shifts or my trade is fundamentally invalidated, I’ll quickly adjust. Be sure to follow me for updates, adjustments, and my ridiculously random market comments.

Thanks for checking out my blog. Good luck and good trading!

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.