Implementing My Long-Term Dollar Trade with USD/CHF Sell
February 14, 2017 by Andriy Moraru
If you remember my June post about the long-term future of the US dollar, you know that I am bearish on the USD for the coming months based on a set of fundamental reasons. And the optimal way of trading this sentiment is going short USD/CHF. Today, I am going to set up the stop order for entry into this position. I will also explain some other factors that strengthen my bearish view on USD/CHF.
The main reasoning (except for the USD-bearish factors listed in the above-mentioned blog post) for this trade is that the Swiss franc is a good candidate for buying against the dollar from the fundamental point of view. Switzerland demonstrates moderately high GDP growth compared with the rest of Europe:
The CPI inflation rate is also returning to the normal values:
At the same time, the country’s foreign exchange reserves continue growing, signaling about an active intervention policy conducted by the Swiss National Bank to keep CHF from appreciating:
From the technical analysis point of view, the monthly chart is currently showing a rising wedge spanning from the early 2011. It was violated only twice — with huge downward spikes caused by the SNB’s manipulation. The entry can placed at a safe buffer distance below the lower border. The one on the chart (the cyan line) uses the 10% of the wedge’s height at the base as the buffer distance. The take-profit can be placed at the obvious support level at July 2011 low.
One of the major problems with this trade is the unfriendly swap. However, the trade will only open after a breakout — when the bearish trend becomes prevalent. Hopefully, my take-profit will be reached rather soon after that. The lowest negative swap on USD/CHF that I was able to find is at InstaForex — it is -$1.90 per standard lot per day.
I will keep this post updated regarding this trade’s progress.
If you have any questions or comments about this long-term short position in USD/CHF, please post them using the commentary form below.