This post comes courtesy of a client who asked us on Twitter to do an analysis on the GBP/CHF pair. He noted that we’ve seen repeated test of the 1.5780 lows and asked if this would be a good area to go long. I took a look, originally he asked about the weekly chart but I thought this daily chart was a good way to show the triangle that it was forming. This triangle spans almost 2 years in the making, starting in Oct 2008. As we can see the 1.5780 is our support, with a descending triangle forming with lower highs. In the short term, this could create a good swing trade from the 1.5780 BUT would only make sense if you keep a very tight stop, and maintain a viable risk/reward ratio for a swing up to the 1.6200 area, because the risk of this breaking the 1.5780 support is still possible. I’d shoot for about a 4:1 risk/reward ratio on such a trade, so about 80-100 pip stop, with a long position shoot for the 1.6200-1.6250 area. At the same time at any point keep an eye out for the 1.5780 area for a potential break of that SIGNIFICANT support level (ALMOST 2 Years in the Making!!). Thanks to foregiven2 on Twitter for pointing this out, and if there are any pairs we’re not following that you have a question about, feel free to ask us on Twitter.
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