Thursday, August 26, 2010

EURCHF—1.2970 historic low

I haven't blogged about this pair in a while. After the Swiss National Bank gave up on intervention it has continued to fall in a lovely, textbook, downtrend. After a move down from 1.4468 (I'm using that rather than the 1.4591 high because both the weeks of 4/16 and 5/28 had it as a high) to the low of 1.3062, the pair retraced to 1.3926 which was almost a perfect .618 retracement. It then dropped down to yesterday's 1.2970 which is a historic low. In doing so it formed a hammer on the daily chart.

So now what? The hammer low must hold. If it doesn't, the break of 1.2970 will lead lower, possibly to 1.28. However there could also be another bounce here. A .382 retracement of the last leg down would lead to a potential price of 1.3335; a 50% retracement would be 1.3448. Around the price of 1.3475 are the 20 and 50 day daily SMA's. There's also positive divergence on the daily chart. The problem here is that with such a perfect downtrend and the negative sentiment against the Euro, price could drop rather quickly. So any long would need that stop just below 1.2970. However a short must also have a tight stop because most pairs don't usually go down in a straight line.

Here's the daily chart:

© Dianne Fecteau, 2010. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.

My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.

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