EUR/CHF went sideway since the last 8 hours, almost formed a flatline on 1hr chart.
Though it closed above the 38.2 fib (1.6580), I didn't open any buy positions, because the CCI was way way up the overbought zone at that time.
The situation right now on 4hr chart is that the price penetrate above the resistance (middle channel) level, and that level now turns into a support level. Price having a hard time crossing down the middle channel, but indicators still on the OB zone. And I need to hit the sack now.
So here's what I did. I opened a 1% risk short hedge (both sell positions) and a 5% risk long hedge (both buy positions). Since EURCHF is at a consolidating phrase right now... soon it will make a breakout. If it went down, I'll gain some few pips from the drop, while holding a drawdown from the long positions. On the other hand, if it went up, the gains from the long hedge positions will offset the short hedge position's loss.
Sleepy Me
Dollar Weak on Subprime Concern
The dollar remains under pressure from the deteriorating subprime mortgage market. The euro set a record high at 1.3797 versus the dollar and the sterling hovers around high levels 2.03.
The market was shocked by continuous warnings on the housing sector this week. Large home appliances retailers lowered profit forecasts, and Standard & Poor’s and Moody’s may downgrade credit rating of over $17 billion debt backed mostly by subprime mortgage. According to Bloomberg, mortgage foreclosures rose 56% year on year to 926k in the first half of this year, in June the rise is a scary 87%. This underlines the fact that the US housing market is melting down and the impact may spread into the broader economy.
The Bank of Japan left interest rates at 0.50% as expected last night. The report showed board members voted 8-1 to keep the rates unchanged, a signal that August may still be too early for the central bank to raise rates. The yen remains under pressure from carry trades.
Source: forexnews.com
Author: Yan Xu
7.12 EUR/CHF analysis
5:30am EST- EUR/CHF 4hr chart:
Ascending channel formed. Price right now is in the middle of the channel, Price usually bounce from this middles. Both indicators showing overbought.
On 1hr chart. Price is in a ranging mode, going up and down in between 1.6560 to 1.6580. Both Stoch and CCI are near overbought area, ADX shows low momentum.
Here's what I'll do. Place a horizontal lines at 38.2 fibo (1.6580) and 50 fibo (1.6550). The 2 lines will be my resistance & support levels for now. Break of the upper line, I'll open both long positions with 3% or 5% risk on EUR/USD and USD/CHF, by using Freedomrocks software (for PMTFC acct) and True North Calc (for TN acct) to compute the proper lot size to allocate for the hedge trade. First TP (target) is the 23.6 fibo on 4hr chart, I will close both long positions on the touch of 1,6612 level and 2nd TP is on the 4hr upper channel.
If price breaks the 50 fibo level down, I might open both short positions with only 1% (dependes on what indicators are showing when it reach that level), using also the same instruments mentioned above to calculate the lot size to hedge. TP will be the round number 1.6500 or lower, depends on indicators.
If price bounce off the lower channel on 4hr chart, I'll go for a long hedge (depende on indicators), Then from there... I'll open a long hedge positions with TP on the upper channel.
From what the indicators are showing right now. I think EUR/CHF will make a corrective down before it rally to the upside.
Note: Daily chart is still bear bias unless price closed higher than yesterday close price.
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Nice trade yesterday. I captured the rally up and scalp the up and down ranges. Nice results will be seen by PMTFC pool members this weekend.
Caffeine shots has nothing to do with the good results, 'coz not a single soul is kind enough to treat me a shot (lolz), Hey! IP address ending with 14, You owe me a drink (lolz). hmmm... probably the inspiration I'm getting from my new found Canadian gal. I love you Lorie! ;-)
Forex News: USD Mired Near Lows
The dollar’s woes were exacerbated as more evidence of problems in the subprime mortgage market were revealed yesterday – triggering a sharp sell-off to record lows against the euro at 1.3786 and a new 26-year low versus the sterling at 2.0285. The heightened risk aversion also prompted speculators to scale back carry trade positions, sending the yen sharply higher – climbing to 120.96 versus the greenbucks and recovered from all-time lows against the euro.
The main catalyst was attributed to S&P’s announcement that it would possibly downgrade nearly $12 billion in subprime mortgage-backed US bonds. The move could potentially add more instability to financial markets and raising warning flags of spillover effects to other sectors of the economy. Also boding poorly for the housing market and consequently, the US economy were earnings reports – in which Home Depot signaled further weakness ahead by issuing profit warnings due to the housing slump.
The euro finally surpassed its previous record high against the dollar set in April, jumping to 1.3786 amid renewed fears from the US housing market. The single currency is poised for further gains this week ahead of several key Eurozone economic reports, set to reveal greater divergence between the US and Eurozone economies.
Source: forexnews.com
Author: Korman Tam
This gives the answer why carrys are unwinding at the moment and support my analysis of a long term bear bias is still intact.
7.11 Perfect Candidate
9:03pm EST- Descending Channel formed on EUR/CHF pair 1h chart.
- Stoch crossed above 20 level; CCI crossed above -100 level.
- Right at 61.8 strong fibo level.
- Inverted hammer formed (1) followed by a pin bar (2).
- Broke above upper channel.
- ADX bear is losing its momentum.
All that mentioned above makes a perfect candidate for a reverse to the upside. But I might be wrong... I still want to see it dip to the 1.6500 before it make a U-turn. Reversing at the current price level seems a bit awkward to me. hmmm... probably that might just make a small retrace to the 72EMA purple line. I opened a 3% risk buy hedge at this level... just in case...
Long term trend is still down, so be careful when hedging both long (buy) positions.
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The long hedge positions I opened yesterday, I closed it at profit a few hour ago. Then, I scalped the down move. Long at 1.6536 (A); closed at 1.6574 (B), then long again at 1.6523 (C); closed at 1.6543.
Yesterday trades was/has the best results for PMTFC account since the cycle 2 started 5 weeks ago.
EUR/CHF 7.10 analysis
Lets hang some art work.
On the daily chart. Pin bar formed 3 days ago, a good indication of a down move. Stoch indicator about to cross down. Price might drop to the round number 1.6500, which also in confluence of a major trendline support and 61.8 fib of the last swing up. Overall is a bear bias.
On 4H chart. Price just touch the lower bollinger band and 50 fibo of the previous major swing. Indicators are in the oversold zone, but need to cross above the -100 CCI and 20 Stoch level to confirm a possible retrace.
Yesterday, I said "the retrace up might be a short one", after that... "it might cross below the trendline". Indeed it retraced (5 & 6 on the chart) and crossed below the support line, but the retrace was too short from what I'm expecting. I was thinking of a retrace up to 1.6588 or 1.6593 (61.8 and 76.4 fibo of the down swing) before head south.
Right now, it is already heading south as I predicted. Indicators are in the oversold zone, I'm hoping for a nice bounce to the 1.6575 area or back to the previous support trendline that turns resistance before in continues to go south again.
Note: Pay attention to the round number 1.6500.
7.9
EUR/CHF just touch the target (TP) I set last friday. The TP is the trendline connected by July 3 lows (A) and July 5 lows (3).
On 1hr chart, the TP or the price right now is also where the 72EMA lays. Indicators shows oversold. A possible of a retrace.
On 4hr chart, Indicators still pointing down. And at the middle of the Bollinger bands.
On daily chart, a pin bar might be form if price ends lower that the highest high last week. Stoch and CCI are at overbought zone to some extent, starting to curve down. Still need the current candle to close to confirm a long term bear bias.
My next step is to open a set of buy hedge with 5% risk equity. If the indicators on 4hr and daily chart are not pointing down, I might set the target at the upper trendline, but since they are pointing down... the retrace range might be a short one. I will just use 1h chart indicators to decide to close these (buy) positions.
If price didn't make a retrace from here and crossed down the lower trendline, I'll open another buy hedge at a lower price.
