Becoming Sophisticated About Risk

CCI to Trigger NZD/CHF Selling


CCI to Trigger NZD/CHF Selling

By Walker England, Trading Instructor

The Swiss Frank continues to be white hot against major currencies around the globe. As discussed yesterday in, Chart of the Day, May 29th, the Frank has been trending strongly against the Euro. Today we find that the NZD/CHF is also testing a critical resistance line allowing for us to find trades with the trend and seeking limits below the March 17th low of .6374.

Tuesday the Swiss released there UBS Consumption Indicator numbers. This number gives insight into consumer spending and gauges demand for domestic products. The results were better than expected with the Indicator reading 1.91 which is well above the expected reading of 1.57. Next on the Economic Calendar are Swiss retails sales to be released on July 4th, which will give further insight into Swiss consumption. If growth continues, it is reasonable to suggest that our trend continues on the NZD.CHF as well.

CCI_Triggers_NZD_CHF_Selling_body_Picture_1.png, CCI to Trigger NZD/CHF Selling

Price Action

Zooming in to a 4H chart we can see how our chart broke out from the range, traded in Chart of the Day, April 21st . Since moving lower the NZD/CHF has resumed its trend and is currently testing short term resistance near the .6900 handle. CCI (20 periods) is currently trading above the overbought level (+100). Looking for a sell signal, we will wait for to CCI travels back below overbought levels.

CCI_Triggers_NZD_CHF_Selling_body_Picture_2.png, CCI to Trigger NZD/CHF Selling

Trading Opportunity

My preference is to sell the NZD/CHF against resistance near the .6900 price handle. CCI will be used for entry with a confirmation of the indicator dipping below the overbought (100+) level. Stops will be placed near 1.6980. Limits should be placed at .6740 seeking a minimum limit of 160 pips, for a clear 1:2 Risk/Reward ratio.

Alternative scenarios include trading a break of resistance looking for higher highs.

Walker England contributes to the Instructor Trading Tips articles. To receive more timely notifications on his reports, email wengland@fxcm.com to be added to the distribution list.

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