My trade idea for USDCHF
Overvalued Swiss franc?
On march 19th, 2015 SNB left benchmark interest rates @ -1.25% and -0.5% and -0.75% on deposits, to discourage holding investments in Swiss Franc. The bank believes that the Franc is overvalued and should continue to weaken overtime. The SNB revised down growth in the Swiss economy to 1% from 2%. They believe that a stronger Franc keeps inflation rates at its negative territory levels, which is not good for the economy. The SNB added that it will interfere in the FX market in case things go against the monetary policy.
Federal Reserve Policy?
The Fed is on its wheel to drive interest rates up by this year as Janet Yellen expects. I believe however that a rate rise this year might be too early, and could cause slow down the U.S. economy with fundamental figures showing hick ups that are blamed to be from bad weather conditions in January, the second quarter's data will suggest whether the blame on weather is valid or not. The first positive indication was the faster than expected US CPI. Even though I don't believe a raise in interest rates might happen this year, the overall trend believes it so we shall follow that or else we will get wiped out if we got stuck on our thoughts.
Divergence
This divergence in monetary policies suggest a great opportunity for us to profit on the long term by buying the USD and shorting the Swiss franc. Regardless of when the Fed will raise interest rates, it is closer to doing that than the SNB. If the Fed rises interest rates, investors will more likely shift from equity markets to money markets which will boost the USD.
Percentage Gains/ Losses
In 2014 the USD CHF offered investors an 11.4% return on Investment. If it was held for the whole year. In 2015 the pair fell by 4% until May. This fall could be a retracement for a higher bound.
Chart
- I personally like to trade price action, on medium term bias.
- The green lines suggest major resistance level, that if cleared could take price to test the succeeding levels.
- Red lines suggest major support levels.
- The trend filter is green and suggesting an uptrend.
-Prices tested the 200 moving average and pinned above it, without a daily candle close. This suggests a downside risk.
- The 0.95282 level is an area of major resistance, if cleared we could test the 0.97, 0.98, 0.99 and finally the 1.00 round level. This would however take place by Q3 of this year.
- Prices also cleared and closed above the 0.38 Fib level.
-I believe that the USD have gained strongly over the course of this week, and it should rest before it could pass the first green resistance line.
TRADE
Target Price: 0.94233
SL: 1.924
TP: I don't set Take profits, as I leave prices to move with the trend, profits are locked in when the upward retracement reaches the 38% fib level.
On march 19th, 2015 SNB left benchmark interest rates @ -1.25% and -0.5% and -0.75% on deposits, to discourage holding investments in Swiss Franc. The bank believes that the Franc is overvalued and should continue to weaken overtime. The SNB revised down growth in the Swiss economy to 1% from 2%. They believe that a stronger Franc keeps inflation rates at its negative territory levels, which is not good for the economy. The SNB added that it will interfere in the FX market in case things go against the monetary policy.
Federal Reserve Policy?
The Fed is on its wheel to drive interest rates up by this year as Janet Yellen expects. I believe however that a rate rise this year might be too early, and could cause slow down the U.S. economy with fundamental figures showing hick ups that are blamed to be from bad weather conditions in January, the second quarter's data will suggest whether the blame on weather is valid or not. The first positive indication was the faster than expected US CPI. Even though I don't believe a raise in interest rates might happen this year, the overall trend believes it so we shall follow that or else we will get wiped out if we got stuck on our thoughts.
Divergence
This divergence in monetary policies suggest a great opportunity for us to profit on the long term by buying the USD and shorting the Swiss franc. Regardless of when the Fed will raise interest rates, it is closer to doing that than the SNB. If the Fed rises interest rates, investors will more likely shift from equity markets to money markets which will boost the USD.
Percentage Gains/ Losses
In 2014 the USD CHF offered investors an 11.4% return on Investment. If it was held for the whole year. In 2015 the pair fell by 4% until May. This fall could be a retracement for a higher bound.
Chart
- I personally like to trade price action, on medium term bias.
- The green lines suggest major resistance level, that if cleared could take price to test the succeeding levels.
- Red lines suggest major support levels.
- The trend filter is green and suggesting an uptrend.
-Prices tested the 200 moving average and pinned above it, without a daily candle close. This suggests a downside risk.
- The 0.95282 level is an area of major resistance, if cleared we could test the 0.97, 0.98, 0.99 and finally the 1.00 round level. This would however take place by Q3 of this year.
- Prices also cleared and closed above the 0.38 Fib level.
-I believe that the USD have gained strongly over the course of this week, and it should rest before it could pass the first green resistance line.
TRADE
Target Price: 0.94233
SL: 1.924
TP: I don't set Take profits, as I leave prices to move with the trend, profits are locked in when the upward retracement reaches the 38% fib level.
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