Free Profitable Forex Newsletter
Hey! This is Philip with this week's trade idea of the Free Profitable Forex Newsletter!
Last week we said that Joe Biden is likely to become the next President of the United States (as dull and as weak of a candidate he may be). And that is now starting to materialize as he only needs to get a few more electoral votes to win the presidency.
On the other hand, Trump has already filed lawsuits for election fraud in several states, probably with more to come in the following days. This is a path to the dreaded contested election scenario we discussed in last week’s newsletter; however, it’s doubtful that the entire Republican party will stand behind Trump all the way in disputing the election, especially if doing so is not backed by credible evidence.
The vote count is still not over, so the final result can still go either way. While, as we said, Biden is in a much better position to win, it’s important to watch this because it’s a possibility that Trump could still win. In such a case, all the moves we are presently seeing in markets (risk appetite) will be reversed, and the USD will soar higher.
We may have to wait until tomorrow or even the weekend before we know the winner, as it was just reported that vote counting in Pennsylvania is stopped for today. Other states may also do so; hence the delay of the results may extend into the weekend.
Buying EURCHF should be a safer trade in this environment
Given the lingering uncertainty, it seems appropriate to look for safer trades. One pair that appears to be poised for a rally, especially if Biden’s win is confirmed, would be EURCHF. There are three distinct reasons why a Biden Presidency should be bullish for EURCHF:
- Biden should be friendlier toward Europe, possibly even roll back some of the tariffs
- Biden should also not be so critical of currency interventions, something that may give the SNB the green light to weaken the CHF (remember Switzerland was placed on the list of currency manipulators by the Trump administration)
- Biden should generally be more positive for risk appetite, thus providing a tailwind for EURCHF and helping to weaken the safe-haven CHF
In the other scenario, if Trump wins (unlikely), EURCHF should still hold up well and may not even decline much. Hence, why I think long EURCHF is a safer trade at this point.
And this rationale becomes even more compelling if we take a look at the EURCHF chart. The pair has hit an important support zone at the 1.0650 - 1.0700 area and has already bounced there. This support will not break easily, especially since the SNB will be highly uncomfortable with that and will likely intervene to stop any CHF strength here.
After breaking the two-year falling trendline back in August, EURCHF has moved in consolidation sideways and moderately lower. It already tested the broken trendline from the other side several times (see chart), and the last test comes now on the US election. Moreover, it is occurring at a confluence area with the 200-day moving average (red on the chart).
The most recent resistance trendline, and the one we need to break to trigger this buy trade, is currently standing around 1.0725. Here, it concurs with the 100-day and the 55-day moving averages (blue and orange on the chart). So, this resistance area stretches from 1.0725 to 1.0750. A breakout above this resistance area should trigger a larger move higher in EURCHF. The pair should be able to reach levels above 1.09, with the
psychological 1.10 level looking like a reasonable target.
It’s worth noting that the market will probably wait for Biden to be confirmed as President before the 1.0725 - 1.0750 resistance will break.
On the other hand, in a Trump win or a contested election scenario, EURCHF may slide lower on the trendline, but should still not break it. While under this scenario, levels toward 1.06 would be possible, it should be a line in the sand that the SNB would not tolerate.
Entry:
- Wait for Biden’s win to be confirmed
- Enter on a breakout of the 1.0725 resistance (may need to enter slightly higher if waiting too late)
Stop:
Targets:
- 1st - 1.09
- 2nd - 1.10 area
Trade signals from the past week
TOTAL: 0 pips in the past week
TOTAL: +3055 pips profit since October 1, 2018
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Any opinions, news, research, predictions, analyses, prices or other information contained in this newsletter is provided as general market commentary and does not constitute investment advice. FX Trading Revolution will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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