Weaker Global Sentiment & Mrs Lagarde at the ECB – CHFJPY Moves Lower

Under Lagarde the IMF repeatedly backed and called for ongoing or further ECB support, so markets are clearly hoping for additional and wide ranging easing measures, although part of the rally in bonds and weakness in the EUR may reflect relief that market-focused Draghi won’t be followed by Bundesbank President Weidmann, who has a much more traditional view on monetary policy.

Indeed, like Fed’s Powell, Lagarde is a lawyer and not a trained economist. However, while many in Germany may lament that Weidmann lost out and that the ECB missed the chance to distance the central bank somewhat from financial market pressures, Lagarde’s skill as negotiator and her wide ranging contacts may help to fill the cracks in the monetary union that are becoming more apparent and to not only improve public support for the central bank, but also to get politicians to finally push ahead with the banking union and further integration.

The euphoria following the prospect of the restarting of US-China talks and cooling of trade tensions (for now at least) has subsided as we move into July, adding a renewed bid for the Japanese Yen.

The CHFJPY pair may not be on every trader’s radar but with a trading system, trading plan and good risk management no asset should be ignored. Indeed the sign of a good trading system/strategy is that it should be applicable to as many markets as possible, be that forex, commodities or equities.

“A chart is a chart” is the call of many chartists. But whatever time frame, asset or approach an individual trader takes they have to be able to follow the rules, accept their losing trades as well as their winning trades and above all manage their risk.

Below are three Trend Following and one Mean Reversion approach to the pair from the close on July 2.

  1. Is the Daily Moving Average approach – the baseline for this approach is a breach and break of the 20-SMA, (109.37) with a Target 1 set by the ATR x 1.25 (108.55) and Stop Loss at the turn in the market (110.55). The higher time frames (Week & Month) are both biased to the downside so the move on the Daily chart is with the trend.
  2. Shows the EMA Crossing Strategy which is also based on moving averages and utilizes the ATR for target setting too, this time ATR x 1 and ATR x 2.5. Stop Loss, as ever, above the turn.
  3. Shows the clarity and simplicity of the Heikin Ashi candle approach – lack of upper wicks and a red candle enough to suggest a short position, Stop Loss again above the turn but this time no target, simply a wait for the candle to change colour.
  4. If Mean Reversion is your approach then again the simplicity of the Awesome Oscillator could be for you. This approach suggested a turn in sentiment July 1 but has yet to suggest a short position as the histogram remains north of zero.

For details on all these approaches and how to manage the most important aspect, YOU then join us during July for our exclusive series of educational webinars.