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The euro has been on a tear these days, so I’m looking for a chance to catch a long position and I’m liking this short-term channel on EUR/CHF. What do you think of this setup?

Long EUR/CHF Idea

Since it’s already the latter half of the week and the pair has already rallied past its usual weekly range, I’m not looking to hop in at market and would rather wait for a correction to broken resistance levels. After all, the odds of profit-taking are really high at this point but I’m thinking that the uptrend could stay intact.

I’m seeing a rising channel on the pair’s 1-hour time frame, so I’m hoping to catch a dip to support. Using the handy-dandy Fibonacci retracement tool on the latest swing low and high shows that the 50% level is close to support, the 1.1450 minor psychological mark, and a former resistance.

EUR/CHF 1-hour Forex Chart
EUR/CHF 1-hour Forex Chart

Stochastic is indicating overbought conditions and is starting to turn lower, which means that buyers need to take it easy and let sellers take over for now. More euro bulls could be waiting to charge at the bottom of the channel anyway.

As my buddy Pip Diddy mentioned, there were no clear catalysts that triggered the franc selloff since late last week but it looks like the monetary policy divergence between the ECB and the SNB could be a huge factor for the EUR/CHF rally.

Most market watchers seem to be betting that the ECB would start tapering its asset purchases pretty soon, and this view was supported by slightly stronger than expected euro zone core CPI. As for the SNB, the Swissy’s depreciation is something that works in their favor, so they probably won’t do anything to oppose it.

Here’s my plan:

Long EUR/CHF at 1.1450, stop loss at 1.1375, initial profit target at 1.1575. I’ll risk 0.5% of my account on this setup for a potential 1.67-to-1 R:R.

I know my stop is a bit tighter than usual but I think this will still give me enough room to cut my losses in case price breaks below the Fibs and the 1.1400 major psychological support. I’ll be aiming for the top of the channel first with this short-term setup, but I’m also open to the idea of just rolling my stop up and aiming higher in case bullish momentum strengthens.

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