The GBP/CHF is one of my favorite pairs. This is because it tends to be very volatile, but very technically driven at the same time. Being a technical trader, this obviously appeals to me, and my preferred method of trading. The spread is reasonable, and it is a cross of two major European currencies, so it makes sense that the market moves somewhat predictably.
As you can see on the chart we have a perfect shooting star formed for the trading session on Tuesday, and it also buts up against a down trending line that has been in full effect since July. Also catching my attention is the fact that the 100 day moving average is acting as resistance as well. And lastly, we are sitting just above the 1.50 level which should be psychologically important as it is a "large round number."
Decision point
What we have in this chart is either a double bottom down at the 1.48 handle, or we have an attempt to break out and above a significant and major downtrend line. Either way, this is an area on this chart that will be important going forward. These are the spots that I love to trade and, simply because one of two things can happen: I can either be correct, or I could be wrong. I know this sounds rather simplistic, but there is a lot to be said for what I call a "binary trade."
It is at points like this that I understand if my trading gets busted and my stop loss is hit, I have simply paid a small portion of my account to find out the larger move about to be made. If you think about that, that's very powerful information. Every time you step into the marketplace, you are risking a certain percentage of your account in order to find out where the market wants to go. Is your job to follow the marketplace, and therefore you should be looking at places like this that line up perfectly for some type of major decision to be made.
Quite frankly, if we can break above this down trending line it will more than likely be choppy. However, that would also signal that we would more than likely go much higher over the course of the longer-term. Alternately, if the down trending line holds, we should see significant downside.
If we close below the lows from the Tuesday session, I will be shorting this pair on Thursday. On the other hand, if we managed to break above the trend line and close above it at the end of the session, I am more than willing to start buying this pair on Thursday. For the meantime, I will be sitting and watching this market today.
