Trade of the week: short EUR/CHF
Since last week's multi-month high in EUR/CHF has been accompanied by negative divergence on the daily RSI and has been formed around previous monthly highs, we would like to short EUR/CHF with a stop loss at CHF0.9450 and a downside target in the CHF0.9340-to-CHF0.9320 region.
(Partial video transcript)
This week's trading opportunity
Axel Rudolph: Hello and welcome back to "Trade of the week" on Monday the 18th of August. I would like to go short EUR/CHF this time and I'll show you on the chart why it's a purely technical setup.
Basically, what you can see is that we made a higher high on Friday than we did earlier in the week on Monday. And this higher high here has not been confirmed by a higher reading of the relative strength index (RSI). You can see we've got a lower high on the RSI and this is called negative divergence. When it occurs in about 65-70% of cases, it does at least short-term, lead to a trend reversal.
Now, that in itself wouldn't get me to put on this trade, but since we're topping out apparently here in an area where we did so several times in the past, you can see that high made in late April of this year was made in a similar area and then also the high going back to January and December. Other highs going back to November of 2024 and even early September of 2024. All of this creates a resistance area where EUR/CHF may actually come off in the days ahead. So, for those technical reasons with this tight stop, what I would like to go do is go short EUR/CHF.
And then, how far could it fall? Well, if it comes back down and if we're just range trading, then I would expect it to slip back down towards the lower end of this range. So we could we could say CHF 0.9320 or even CHF 0.9340 - it doesn't really matter because the risk/reward setup is pretty good.
This week's trade in summary
So this week's Trade of the week is to short EUR/CHF at around current levels, with a stop loss around CHF 0.9450, and a downside target let's say between CHF 0.9340-0.9320.
Previous trading outcomes
Let's also look at the previous "Trade of the weeks" going back to the beginning of July. What we had there was EUR/GBP and we were short here at around current levels. Since then, that one has gone a lot against us but we didn't get stopped out. But now that we are back again and we are holding at support, I would like to just exit that short position at break even. So, that one we just closed down.
And then also from last week, we went short gold at $3,375.00 per troy ounce. That one I would like like to exit because that one made us a good profit in the in a few days. So, that one you can also exit.
And last week Chris Beauchamp had a brilliant trade on going long down the S&P 500 on Monday the 4th of August. That one hit our upside target at 6,450. So if you're not out of that one there, then perhaps it's time to exit it now.
These were all the trade setups for the last few weeks.
Important to know
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Connect with us
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Professional clients trading spread bets and CFDs can lose more than they deposit.
Options and futures are complex instruments which come with a high risk of losing money rapidly due to leverage. They’re not suitable for most investors. Before you invest, you should consider whether you understand how options and futures work, the risks of trading these instruments and whether you can afford to lose more than your original investment.
Trading stocks and shares ‘on margin’ within a US options and futures account – meaning that you only finance part of the cost of acquiring a position in a security – carries additional risks over buying securities on a fully funded basis and may result in losses exceeding your original investment. Trading on margin will also result in additional costs to you as the investor and any securities purchased using margin may be held as collateral by the lender, restricting both your rights as shareholder, and your ability to use the securities until the margin trade is closed. You should familiarise yourself with these risks before trading on margin.
The value of shares, ETFs and other ETPs bought through a share dealing account, a US options and futures account, a stocks and shares ISA or a SIPP can fall as well as rise, which could mean getting back less than you originally put in. Past performance is no guarantee of future results. Some ETPs carry additional risks depending on how they’re structured, investors should ensure they familiarise themselves with the differences before investing.
Share dealing and IG Smart Portfolio accounts provided by IG Trading and Investments Ltd, CFD accounts and US options and futures accounts are provided by IG Markets Ltd, spread betting provided by IG Index Ltd.
IG is a trading name of IG Trading and Investments Ltd (a company registered in England and Wales under number 11628764), IG Markets Ltd (a company registered in England and Wales under number 04008957) and IG Index Ltd (a company registered in England and Wales under number 01190902). Registered address at Cannon Bridge House, 25 Dowgate Hill, London EC4R 2YA. IG Markets Ltd (Register number 195355), IG Trading and Investments Ltd (Register Number 944492) and IG Index Ltd (Register number 114059) are authorised and regulated by the Financial Conduct Authority.
The information on this site isn’t directed at residents of the United States, Belgium or any particular country outside the UK and isn’t intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.