Thus far, it has been a slow day on the forex. Aside from the commodity dollars, the majors are in relative consolidation following a group of weak U.S. economic numbers. At this point, it appears that holiday trading conditions are already upon us.
Safe-havens are seeing some action, led by a rally in gold. The USD/CHF and USD/JPY are following suit, modestly rotating to the bear. It appears that sentiment is mixed among active traders today, with safe-havens and stocks rallying amid light participation.
Slow Forex Conditions: USD/CHF In Heavy Rotation Near .9850
The mid-June daily downtrend in the USD/CHF is currently absorbing a stiff challenge. Rates have bounced from the .9700 handle by more than 150 pips ― is a return to par value in the cards by July 31?
Well, a July bull run to par is certainly a possibility. However, given the current fundamentals facing the USD, another 150 pip gain is likely to take a considerable period to realize. Rate cuts and fading economic performance typically don’t do much for the Greenback against the Swissie; if the USD/CHF hits 1.0000 this month, it will likely take at least a few weeks to do so.
Here are the levels to watch for the remainder of the forex session:
- Resistance(1): Bollinger MP, 0.9885
- Support(1): Daily SMA, .9841
Bottom Line: Trading the forex during periods of sparse participation is always a challenge. When doing so, it is best to look for modest profit targets and keep stop losses tight.
For the rest of the day, I will be selling the USD/CHF’s daily Bollinger MP from 0.9984. Using a tight 8 pip stop loss, this trade produces 8 pips on a standard 1:1 risk vs reward management plan.