The EUR/CHF currency pair continues its descent from its 2007 high at 1.6827. Since this time the pair has fallen over 4700 pips and has carved out new all time lows at 1.2124 on June 16th of this year. Price is currently testing support and resistance in a symmetrical triangle pattern while threatening to breakout to create fresh lows.
The EUR/CHF is a classic safe haven trade. The Euro Zone is still having issues regarding its member nations in an ongoing debt crisis. As traders look for alternatives, many are turning to their geographic neighbor, Switzerland, to park their money. This demand for Swiss Francs has not only encouraged the currency rally against the Euro, but making the Swiss one of the strongest currencies over the last three years. Coming up later this week, on the Economic Calendar , are German IFO and Retail Sales numbers that have the potential to be the catalyst to push our long standing trend to fresh depths.
Price Action
Moving in to a H4 chart, we can see a Symmetrical Triangle forming on the EUR/CHF currency pair. Normally symmetrical triangles are known as continuation patterns. A breakout above below support at 1.2070 would signal a breakout to the downside and a resumption of our downtrend. Traders may place entry orders on either side of the triangle depending on their preference awaiting price to breakout.
Trading Opportunity
My preference is to enter the EUR/CHF using entry orders in the direction of the trend. I would look to sell the EUR/CHF pair below current support, near 1.2070. Limits should be placed at a new low of 1.171, looking for a minimum profit of 360 pips. Stops should be placed at 1.2250 or better for a clear 1:2 Risk/Reward setting.
Alternative scenarios include price breaking to the upside above support at 1.2150.
Walker England contributes to the Instructor Trading Tips articles. To receive more timely notifications on his reports, email instructor@dailyfx.com to be added to the distribution list.
