By Russell Glaser – For the past 2 months the EUR/CHF has made a correction in the long term downward trend. But the failure of the pair at the 200-day moving average line shows the upward momentum has stalled. This presents an opportunity to trade with the long term trend.
The EUR/CHF corrected more than 50 % of the late May to early September move.
But the correction looks to have halted near the 200-day moving average line. As such, the long term bearish trend should resume.
A signal to enter the trade may be taken from two places. The first may be a close below the 20-day moving average line. This moving average line previously served as a nice support during the correction and could also later act as a resistance in the future. The second signal may be given when the RSI (14) breaches below the rising trend line.
The first support level (S1) is found near 1.3460, the 38.2% Fibonacci retracement level from the late May to early September move.
A protective stop can be placed above the significant technical barriers of the 200-day simple moving average, the current downward sloping trend line, and the 61.8% Fibonacci retracement level of the late May to early September move. The stop should be located just above the August pivot of 1.3920. This would give a risk of roughly 350 pips. Should the pair close above this level it would signal a shift in the long term trend to the upside.
Traders can target a level above the swing low for the pair at 1.2760. This would give a potential profit of approximately 700 pips and a decent profit to risk ratio of 2 to 1.
Forex Market Analysis provided by ForexYard.
© 2006 by FxYard Ltd
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