Trading 0.9450 USD/CHF

USD/CHF has been rising since early May from around 0.87. In the last week it reached 0.94, so while there's no doubt the trend is up, we're looking for one more rise after which we'd likely expect a significant correction. We'll discuss the details of one last long USD/CHF trade (for a little while).

This three-hour chart includes a simple Elliott Wave count from late August low of 0.9125. The wave count shows the recent pullback to 0.9309 as a likely completed fourth wave correction. Therefore, we're looking for a fifth wave higher with likely targets towards 0.95. Overnight euro-related news has pushed price lower into the 0.9330s.

The concern here is how far the final wave may go. With USD/CHF overbought, we'd prefer to err on the conservative side. A typical minimum target the for fifth wave would be 61.8% the size of the first wave. That level is 0.9413, so for this setup, we'll look to set a target slightly below this.

Therefore, we’d look to buy USD/CHF at (or below) 0.9350. Our stop will be at 0.9308, a pip below the fourth wave low. As this is a 42 pip stop, our target needs to be at least 42 pips above entry and that is satisfied by our conservative upside target of 0.9410. This setup looks to gain 60 pips while risking 42 pips with a risk/reward of 1.43. While this trade can be entered above 0.9350, the problem is that it quickly (and significantly) reduces the risk/reward.

Long Setup for USD/CHF

• Trade: Buy at (or below) 0.9350.

• Stop Loss: Place the stop at 0.9308.

• Take Profit: The single ‘take profit’ level is 0.9410.

• Trade Management: If price reaches 0.94 without triggering the entry, cancel all orders.