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The Gbpchf currency pair seems to have a trick up its sleeve. It does this quite a bit, but once you get a feel for it, it can be a nice pair to trade. It also moves very well. The daily chart below shows price trading against the down trendline, at a .618 % Fibonacci retracement level. It gave what looked like a great sell setup on the 4hour timeframe before shooting up higher. This is where it gets tricky, and the price action has to be watched very carefully. Against this daily trendline resistance and this bearish 1hr bar that is setting up as I write this, it will give the impression of being a bullish fake-out, and that it will be dropping.
However, I will not be quick to short it. The general price action looks very bullish, so I need to see 1.5560 4-hour support breached before I even consider shorting the pair. To the upside, if a bullish breakout were to take place, the weekly timeframe has a shelf of past support at the 1.5850 level, and I think that is a very likely target for the bulls. A bullish 4 hr close will set the stage for a test of this area.
The overall setup is very aggressive, so if the setup plays out accordingly, it would be advisable to reduce your regular position size to compensate for the risk.
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When trading always use a stop loss and calculate the proper risk management for your account. This analysis aims at providing assistance to the forex trading community here at Winners Edge Trading, thereby helping them to make informed trading decisions.
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