US Midterm Elections and the SNB

It has been reported on Friday President Trump is expected to impose new tariffs on China despite the negotiations that took place towards the end of last week. It has been affirmed by the Wall Street Journal.

The trade war between the US and China has been dominating the market for some time. The neckline in the DAX30 we discussed last week is holding at the time of this writing after being tested by the market. We are nevertheless noting very-early indications for weakness across the US indices.

We assume it may be related to the US midterm elections in November but it is still too early to determine the elections may trigger heavy selling across the indices.

One of the currencies that gained our attraction is the Swiss Franc (CHF). To recap, it has been suggested the Swiss National Bank (SNB) intervened in the Forex market in an effort to weak CHF. We are noting several weak entries in CHF, which is not in line with the market fundamentals.

An escalation between the US and China may drive safe haven flows into CHF. The Swiss Franc may only weaken if the tension is eased or via an intervention. As we may target CHF we must cautious in what currency pair or cross we are selecting due to the primary currency.

We should add that since the removal of the 1.2000 floor in EURCHF we refrain from holding long CHF positions.

EURCHF Weekly Chart

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US Midterm Elections and the SNB

EURCHF Weekly Chart 16/09/18

AUDCHF Weekly Chart

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US Midterm Elections and the SNB

AUDCHF Weekly Chart 16/09/18

NZDCHF Weekly Chart

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US Midterm Elections and the SNB

NZDCHF Weekly Chart 16/09/18

As seen from the above CHF charts the potential for a reversal began prior to the support. There are incidents in which a reversal takes place prior to testing the support but it is fairly challenging to capitalize on. Our main concern is ensuring we are unaffected by the primary currency, EUR, AUD or NZD.

We must highlight that we are not anticipating a significant intervention by the SNB as we have seen several years ago. The main risk is that we are entering prior to the re-test of the support levels as shown in the charts. We are unlikely to layer a weekly stop (which is often larger than daily stops).

We will wait for the opening of the Forex market to determine how we wish to proceed. Do note it may take some time for the spreads to stabilize, particularly in CHF pairs and crosses.

AUDCHF Trade Alert

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US Midterm Elections and the SNB

AUDCHF Weekly Chart II 16/09/18

AUDCHF long at market price (ask 0.6927)
Take profit: 0.7200
Protective stop: 0.6800
Risk Ratio (RR): 1: 2.1 (approx.)
Estimated duration: 21 days

Relevant as long as AUDCHF is below 0.6965

Note: We had to choose between AUDCHF and EURCHF, we did not wish to opt for EURCHF. To recap, this is an early entry as the price did not reach the support at the time of this writing as discussed in the weekly update.

We are aware that tension between the US and China may drive safe haven flows into CHF. We are attempting to capitalize over a potentially minor intervention by the SNB as was seen last week.

There are risks associated with this entry, corrective gains must materialize this week if we were to consider remaining in the trade. The potential drawdown is a re-test of 0.6825.

19/09/18 SIGNAL UPDATE: AUDCHF recent gains in today’s session paved the way for a possible +70 pips retracement. We are unwilling to absorb the potential retracement. In an event the price corrects lower we may re-enter AUDCHF at a lower price.

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AUDCHF Forex Signal 19 September 2018

AUDCHF Weekly Chart 19/09/18

AUDCHF is trading at 0.7027 at the time of this writing, we are closing the long trade at market price.

All of the above trade updates on this page were issued via email to our members.