Tim Lucarelli / fxaddicts.com
Here is a market that has an almost fool proof stop provided by the Swiss National Bank (SNB). The Euro Swiss cross has a floor set by the SNB at 1.2000. The floor was set on September 6, 2011 and the cross rallied over 1,000 pips that day. Since then it has traded as high as 1.2450 and as low as 1.1990; give or take a few pips.
For five months it dragged along at just above 1.2000 as the SNB defended the floor. In September this year after a strong test of the floor the SNB pushed it above the five month trading range at which point fundamentals took over and market participants drove it even higher above 1.2100.
Now the cross has stabilized at a higher level than just above 1.2000, with all the technicals of a market that is primed to move higher. I was really hoping it would fall back to the 1.2010 area before it went to make new highs, unfortunately that is becoming less of a possibility.
Since the SNB has set the stop at 1.2000 the risk is from entry point until just below 1.2000; reason is that it can overstep that 1.2000 level momentarily if the SNB does not react quickly enough.
Profit potential is back up to the 1.2400 level or about 300 pips from current levels. That is a per contract risk reward of $1,000 to $3,000, a very good ratio.
Buy or Sell: Buy
Range: Below 1.2090
Chart: Daily chart of the EUR/CHF with Stochastics set at 12-3-3
- Swiss National Bank