USD/CHF Teknik Analiz - USD/CHF Ticaret: 2015-01-22

Ahead of ECB decision

The ECB meeting will be held today. As a result, the bank’s officials will decide on the amount of money printed, needed to stimulate inflation in the eurozone. Currently, deflationary risks threaten with the production recession and rising unemployment rate, which boosted above 11% in the third quarter of 2014. According to Wall Street Journal and Reuters, bond-buying program will count for €50 billion per month and will last for a year: more than a moderate amount compared with the US QE. Apparently, the traditional planned information leak is required for filling the market with liquidity ahead of the official ECB statement. The data suggests that policymakers are preparing for more intense economy stimulation.
The same goes for the Swiss National Bank, which has not only denied keeping the euro capping, but also immediately cut the interest rate – an unprecedented step taken by the regulator over the past few years. To cut a long story short, today we have to expect strong fluctuations and unpredictable moves of the euro against other liquid currencies. The most probable direction is the bearish one. However, the presence of market makers is also suggesting a strong bullish momentum before the bearish trend formation.

Here we consider the EUR/CHF currency pair on the H4 chart. The price remained within the equilateral triangle: the uncertainty of investors about the upcoming movement leads to fallen trading volumes and decreased volatility on the spot market. This equilibrium is temporary and unsustainable. However, both the price and the RSI-Bars oscillator still confirm the flat market. Donchian Channel is also showing a significant narrowing. As the price is moving sideways, you should focus more on the oscillator chart: bars form a weak downtrend – the most probable further direction.
In this kind of situation, the most reasonable trader should set a volatility trap, i.e. two pending orders, Buy/Sell near the boundaries of the current range. Low volatility makes it possible to enter the market with lower risks: less than 1% of the deposit on the illiquid market. The most likely target motion is determined by the current channel width. For this reason, we propose to close half of the volume position at 1.04183 (long position) and at 0.95003 (short position). After partially closing the order, the other pending order can be cancelled: we will be sure that the market chose the price direction. After order opening, Stop Loss is to be moved according to the price movement near the next fractal high (short)/low (long). Thus, we are changing the probable profit/loss ratio to the breakeven point.

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