All Trade Ideas and trading scenarios found on FX360.com are hypothetical. FX360.com has not placed these Ideas in a live trading environment. Forex Trading involves high risks, with the potential for substantial losses that exceed your initial deposit and is not suitable for all persons. Past performance is not necessarily indicative of futures results.

GBP/CHF: Selling Short-Term Bounces

Last updated 1/25/2012 2:12 PM EST (GMT -5) 0 Comments - Add your comment

• Share this:

Matthew Weller

Technical Analyst, GFT

** Note that this trade triggered during publication of the article. Sell opportunities anywhere above the 1.4445 level would represent favorable entries into the longer-term downtrend **

Today’s FOMC interest rate statement has caused a substantial drop in the USD and broad-based rally in all risky assets. When so many currency pairs are experiencing substantial fundamental volatility, it can pay to look at the longer-term trends and support / resistance levels that may come into play.

One currency pair that has been exhibiting a clear trend over the past two weeks is the GBP/CHF. Since peaking near 1.4800 in early January, the pair has been pushed steadily lower and now trades just above 1.4400. Any further bounces into this resistance area may present higher probability selling opportunities, as the previous four touches of this trend line have all led to new lows.

A further bearish sign emerges when we zoom in to the 4hr chart. We can see that the central monthly pivot point is located at 1.4538, near the precise high hit earlier today (recall that pivot points are simply leading levels of support or resistance mathematically derived from a previous period). The convergence of this level and the bearish trend line led to this morning’s drop and forms a very significant resistance zone moving forward. While the risk/reward ratio of joining this longer-term bearish trend at market is not immediately compelling, there is an opportunity to sell if rates bounce.

Specifically, traders could set a limit sell in the GBP/CHF at 1.4445 (near previous-support-turned-resistance) with a stop at 1.4546 (above the converging resistance highlighted above) and a target at 1.4327 (just above the Monthly S1 pivot at 1.4317). This trade would be invalidated by a drop below 1.4375 or if not triggered by the end of the week.

Potential Strategy: Sell if GBP/CHF bounces to 1.4445, stop at 1.4546, target at 1.4327.

For more intraday analysis and trade ideas, follow me on twitter ( @MWellerFX ) and attend our daily Live Market Analysis webinars. Visit your local GFT website under “Seminars and Webinars” to sign up.

The information, including Commentary and Trade Ideas, provided on FX360.com should not be relied upon as a substitute for extensive independent research which should be performed before making your investment decisions. Global Forex Trading and FX360 .com is merely providing this information for your general information. The information and opinions presented do not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision and should tailor the trade size and leverage of their trading to their personal risk appetite. Any projections or views of the market provided by FX360.com may not prove to be accurate.

The views of the authors and analysts are not necessarily those of Global Forex Trading, its owners, officers, agents or other employees. FX360.com and the currency research team will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained on FX360.com. Global Forex Trading and the currency research team do not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought.

Loading...