USDCHF 11-26-06

11-26-06

USDCHF

I never entered a short position in the USDCHF last week. I like to enter short trades on pullbacks to breakdown areas, and when a strong trend move happens, you run the risk that there will not be any pullbacks. I always like to know my risk before entering any trade, and pullbacks give you the opportunity to define that risk. Prior to the sell off, the USDCHF traded in a tight range between 1.2400 and 1.2450 for most of the week and our last trade was actually a counter trend long trade at 1.2410. The USDJPY did pullback to the 1.1822 breakdown area giving us an opportunity to participate in the dollar sell off. The long positions in the EURUSD and GBPUSD were entered on pullbacks to breakout areas.

There will not be any more counter trend trades in the USDCHF until the moving average on the 60 minute chart catches up to the middle of the trading range. That would take about a week of trading in a very narrow trading range. There are no areas of demand on the higher time frame charts that would cause that type of horizontal action until 1.1622. Watch for a bounce at 1.2015 which was the low on 6-9-06 this year and 1.1920 which was the year low on 5-19-06. I am riding the dollar downtrend with long positions in the EURUSD and GBPUSD for now, but I will look to short
a retrace to 1.2221 as long as the risk to reward is at least 2 to 1 at the time of entry.