Trading the Swiss Franc Now is Like Extreme Skiing in the Swiss Alps

Trading the Swiss Franc Now is Like Extreme Skiing in the Swiss Alps

Trading the Swiss Franc Now is Like Extreme Skiing in the Swiss Alps

How to trade after it gained a whopping 15% last week

After something dubbed “the forex event of the year”, we examine in more detail what happens next for the Swiss franc and how things have changed.

Here is a recap of the announcement and its aftermath and why it will impact a wide array of participants in the market.

What can definitely be expected is more volume in the coming weeks. Although there is no official data for it and you can’t see it, it is there. This will make for sharper and steeper moves in the coming weeks. Just like the ones these guys are doing.

We mustn’t forget that even without the Swiss National Bank’s decision, there was already heightened tension in the markets with everything going on with the Russian rouble and the grim reports surrounding the Eurozone economies.

Because of this, next Thursday will be a crucial day for both the franc and the euro. The European Central Bank and its president Mario Draghi will be holding a press conference and will explain if they will be starting any Quantitative Easing (QE). The significance of this is that if it is enough it might jumpstart the European economy and provide more political stability among the waning support for the European project.

Given that Switzerland is surrounded by EU countries and that the largest portion of the franc’s physical trading is with the euro, this will be vital for any new developments for the currency.

So what should you look out for? The answer to this has two versions, the first one is for traders with little or no experience. If you’re one of them, you actually have an advantage, as this is not a regular situation and you’re not burdened with the usual pace of the market, which has gone out the window and won’t come back for at least several weeks. If you follow closely how the pair moves, you might find some openings in both directions as the moves will have more pips and allow more room for entry and exits.

If you do have some experience, be mindful of the irregularity of the situation and some trading techniques might not work. Trading styles get distorted in exactly this type of situation and if you add a stubbornness or inability to adapt, you might register a significant loss. Just like we mentioned in our article discussing oil several weeks ago, this is the markets on steroids. The price levels are far more susceptible to any news, more so to a major announcement like the one next Thursday.

In any case, the usual way the EUR/CHF and USD/CHF behave will be different in the near future with more peaks and troughs. Keep your focus or risk experiencing what he did.

One thought on “Trading the Swiss Franc Now is Like Extreme Skiing in the Swiss Alps

  1. Today’s news calendar for the US trading session is relatively quiet, but we do have some events this week that could spur on some market movement and you will want to make note of those on your own financial calendars throughout the entire week, going all the way into Friday with US non-farm payrolls.

    All right, let’s get started here with the US Dollar versus the Swiss Franc [USDCHF]. We’re looking at the daily timeframe. In the live, daily Trade Room, we’ve been discussing this downward-facing channel here. The two red trend lines that you see here on my chart. Downward-facing channel. Throughout the past couple of weeks, we’ve been studying the rising within that pattern.

    Previously, along the blue trend lines, we saw it find a low along the bottom and rise all the way to the top. In a recent pattern, we saw it find a low, but not making it all the way – quite all the way – to the top of the pattern, and now falling back down towards the mid-0.9500s. Of course that doesn’t mean we have turned all the way back down and we’re going to see it go all the way back down to the bottom, but definitely something to take note of is the fact that we have not completed the pattern this time so far and moved all the way to the top of the range.

    If it starts to go bullish again, we would of course look to target back to the top of the range, but currently, last week, the market was clearly bearish here for the USDCHF. Of course like I said, we have news events all this week that could change everything that we’re looking at here on this currency, but definitely, at least at this current point, we have a bearish momentum built into the market.

    Let’s go ahead and zoom in a little bit here on the daily timeframe. Five days in a row it’s been going down. Doesn’t mean it has to continue down, but definitely something that you would take note of. If you’re looking to sell in this direction, there’s two reasons to sell it. I think, first off, you would look for it to come back up here into this pink zone, close to the 0.9600-level, if you’re looking to go short. I don’t think at the current moment it’s a good idea to go short because we’re clearly into the support level, into the mid to upper-0.9500s, the green-shaded area.

    So, currently the green-shaded area is our support. If you’re looking to go short again, it either needs to go up to the pink zone or break through this green-shaded area, and then we could look for it to tackle the next support, which is down here at the purple-shaded area. If we start to see some evidence of reversal, maybe a break above the pink zone, we might look for the bullish action to return, but currently bearish, and I think that’s probably the direction at least for the first part of this week that we’ll continue to focus our efforts on.

    Down here to the four-hour timeframe. You could see it’s kind of stuck right now between the pink and the green-shaded area. So, what I would expect that we’re looking for is a breakout of this congestion that we’re in right now. Above it, may start to signal the upside again for the USDCHF. Below it, as it is right now, and getting below the green-shaded area, further movement down towards the 0.9500-level would likely be expected. So, watching for a breakout of this congestion will probably be your key to direction for the USDCHF this week.

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