Wednesday, 4 September 2013

Momentum Buy Signal Alert on USD/CHF

The USD/CHF has been living in a 3-storied house (550 pips tall), and at this point in time we have the USDCHF climbing back up to the top of the first floor, ready to break through to the second floor channel (0.9400-0.9555). USD/CHF reached a 7-week high today at 0.9376, the pair's highest since August 15 and now the pair is consolidating at 0.9365.

The 31-period momentum crossed over zero, giving us a buy signal on this pair at close of today's bar (Sept 03, 5:00 PM EST), entry price 0.9363. At the same time the pair has crossed above its 190-SMA, indicating a bullish trend is underway.

On August 15, we had gone long this pair at 0.9351, only 11 pips lower than today's entry, but the market turned against us and we were stopped out at 0.9261 (-91 pips). Hopefully this pair will continue forwards and not give us a déjà vu head-fake. Bear in mind that the .9400 level is a major psychological resistance, with many bears positioning themselves for a sell-off down to 0.9300 or 0.9200, so be careful.

Fundamentally, the dollar has been supported by expectations that the Federal Reserve will start to unwind its stimulus program at its upcoming policy meeting on September 18. Moreover, the pair has rallied since risk aversion took hold of the markets. Today's (Monday) ISM data was much better than expected (actual 55.7 versus forecast 54), hinting that the the manufacturing sector continues to expand.

The risk-off dollar rally, fuelled by the hint of more tapering and stronger manufacturing, overshadowed the good GDP numbers coming out of Switzerland. Switzerland's GDP expanded by 0.5% in the second quarter; YoY Q2 GDP rose 2.5%, beating expectations for a 1.7% increase, news that should have strengthened the franc but did not (or at least not yet).

Click to Enlarge USD/CHF Daily Forex Chart

Strategy

Signal  Momentum Buy Signal on USD/CHF, Entry Price: 0.9363
(Generated at close of daily bar, Sept 03, 5:00 PM EST)
Strategy Logic Strategy uses Momentum, Moving Average and Price Channel to develop trade signals:
  1. Momentum strategy buys (sells) when the 31-Period Momentum is greater than (lower than) than 0. 
  2. Moving Average strategy buys (sells) when close crosses over (under) the 190-SMA. 
  3. Price Channel strategy buys (sells) when close is greater than (lower than) the highest bar (lowest bar) of the last 21 bars. 
Stop Loss When daily close crosses below 190-SMA (now at 0.9347). 
Take Profit 200 pips (0.9550)
Download MomoUSDCHF-D1_Sept03

All trade ideas and strategy setup suggestions found on blog.excelmarkets.com are hypothetical. blog.excelmarketse.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 future results.
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