Flying Start for the Buck, USD/CHF Remains Supported

Posted Monday, January 2, 2017 by
Eric Furstenberg • 3 min read

What a frustrating day to see the markets move, but being unable to trade it. The FX market was closed for retail trading today. With my broker, I could actually see the currency pairs move, but I couldn’t place or modify any trades.


I can’t wait to place my first trade for the year. Tomorrow is a normal trading day, so I’m really looking forward to what lies ahead.


The first quarter of 2017 could be a great time to trade the markets. I reckon we could see some decent market movement in the exchange rates. You see, there is an element of uncertainty surrounding the new US president Donald Trump. The world is not sure what exactly to expect in terms of changes in US political, fiscal, and monetary policy. Perhaps his leadership will be a strong wind in the US Dollar’s sails for quite some time, who knows.


Strong trending markets are the easiest to trade and make money from. I would be really pleased to see some strong trending behavior in the first quarter of 2017. It’s not that there aren’t any good trends at the moment, but we’d have to see a continuation of the current trends, and hopefully a few extra opportunities will arise.


For now, let’s look at some of the trends which are already in play, as these hold the best potential for us to profit from.


USD/CHF – Support Confirmed


Today the USD/CHF managed to get above an important support zone again. Last week the pair sold off aggressively on Friday, but regained most of these losses and left a long downward wick on the daily chart. Let’s take a look at this chart:


USD/CHF Daily Chart


Today the pair managed to post a firm close above the former resistance zone which is currently holding as new support. You’ll notice that the pair has formed a higher swing low in the last two trading days, which is very encouraging to the bulls. Something else that I like about this setup, is the fact that the pair closed back above the 20-day exponential moving average today.


The next few days will be important, to see whether the pair will gather enough strength to push forward and conquer new highs.


Today’s strong close on the USD/CHF establishes my bullish bias. I would, however, be much more comfortable in my bullish shoes if we saw the pair break to new highs soon.


EUR/USD – The Bulls are Getting Slaughtered


The Euro and the Swiss Franc are strongly correlated. Therefore, when the EUR/USD moves lower, the USD/CHF many times moves higher. Today we saw this clearly as the US dollar strengthened against both of these major currencies.


Today’s weak close on the EUR/USD is very significant indeed. In itself, today’s candle would probably not have meant much, but if we consider Friday’s large pinbar candle with its very long upper wick, it really means a lot. Look at the following chart:


EUR/USD Daily Chart


So what makes today’s candle so powerful? Well, all the buyers who drove up the price so aggressively on Friday, have either been stopped out of their long positions (or closed them manually) already, or they are still holding on to their positions which are in the negative. This is called a bull trap. When the bulls start closing out their long positions as they get into more and more trouble as the price falls further, they can only exit their trades by selling. This adds more fuel to the decline and can make this a very profitable setup to play on the short side.


Tomorrow (Tuesday) doesn’t offer major economic data releases. There will be some production numbers out of the UK and USA, but I don’t expect it to move the market much, except if the released numbers are far better or worse than which is expected.


It is a holiday in Japan and New Zealand tomorrow, which could also keep some liquidity away from the market.

All the best, and may you also have a flying start with your trading this year!

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