Technical Analysis USDCHF : 10 October 2014

by IFC Markets

Franc lurking around
Today at 14:30 CET we expect the publication of employment data in Canada: Unemployment Rate and Employment Change. Both indicators are based on the monthly data. However, it should be noted that we can get more detailed information by analyzing employment changes, which indicate the reduction pace of unemployment rate in the country. The second indicator, Unemployment Rate, is the absolute value of the unemployed manpower. It is suitable for long-term investors (D1, W1 and more). The positive sentiment is observed in the market: Employment change is expected to be increased. If the forecasts are proved to be correct, we should count on the weakening of the competitor, the US dollar. Since the USD/CAD currency pair demonstrates contradictory technical signals, we tend to use the anticipated volatility momentum indirectly.
Here we consider the USD/CHF behavior on the H4 chart. The price is located in the unstable position now. There are two possible scenarios: the completion of the daily uptrend, or its continuation. The second possible variant: the current trend line breach would be false. The local instability is beneficial for position trading: as soon as the market chooses the direction, we would expect confident moves from investors and speculators. Meanwhile, we can leave both options open. The return to the daily uptrend channel is expected when the fractal resistance would be broken at 0.95618. It is confirmed by Parabolic historical values. This mark can be used for placing a pending buy order. Stop Loss is recommended to be placed below the significant fractal support at 0.94661. This level is strengthened by the DonchianChannel lower boundary and the current value of the trend indicator.
We suppose that in order to receive a further bullish momentum confirmation, the RSI-Bars resistance breach at 49.4681% should be recorded. This signal will provide more confidence for conservative traders. If the D1 trend line breach is not false, the opposite position will be opened automatically: a pending sell order at 0.94661, and Stop Loss is to be placed above 0.95618. Once one of the orders is triggered, it is recommended to cancel the second one. In this case, we assume that the market has determined the current direction.

After position opening, Trailing Stop is to be moved after the Parabolic values, near the next fractal trough (long position), or fractal peak (short position). Updating is enough to be done every day after the formation of a new Bill Williams fractal (5 candlesticks). Thus, we are changing the probable profit/loss ratio to the breakeven point.

Position Buy
Buy stop above 0.95618
Stop loss below 0.94661
Position Sell
Sell stop below 0.94661
Stop loss above 0.95618

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