Swiss Franc Liftoff

Swiss Franc FXF, Japanese Yen FXY, and US Treasuries TLT

Swiss Franc FXF, Japanese Yen FXY, and US Treasuries TLT

I find this an interesting chart.

We see that the Swiss Franc has blown through the 50 AND 100 day Simple Moving Averages after a long period of tracking lower as the Euro fell. We also today had what looked like a “Whale” selling out a gold position and covering a Euro short.

What does all this say to me?

Most likely some large hedge fund(s?) clearing out of a “long gold short Euro” position and repatriating the profits to “a safe place”.

So I’d speculate that the Euro down trade is likely over (and the US$ up trade with it). I’d also already said I thought it was time to be out of gold (in the WSW posting). A good call… And for now, at least, it looks like the Yen, the Swiss Franc, and US Treasuries are the place to park things between trades.

I would caution that with RSI at 80 there is already a bit of “heat” in this trade. It’s not an ideal entry point. In theory, the price ought to come back to the SMA stack from the top side for a confirmed entry. Unfortunately, the currency markets are often driven by political things (like central bankers) and so do not always behave in an orderly fashion…

What to do? Start “scaling in” to Swiss Francs is how I read this.

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About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
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2 Responses to Swiss Franc Liftoff

  1. KevinM says:

    Forex is scary. Got any local suggestions?

  2. E.M.Smith says:

    Well, my basic advice is “Never trade something if you are uncomfortable with it. Learn more first.” Though I often break that with ‘tiny’ trades as I learn…

    In some ways FOREX is easier than stocks. There are no quarterly earnings reports. No CEO perp walks. No competition product announcements.

    But you do have central bank intervention (that usually fails, but not before screwing up a trade or two). So if it starts ‘acting oddly’ you don’t ask why, you just step aside.

    The other issue is simply that you are already trading FOREX, but just not paying any attention to it…

    So you buy OPEC gasoline and Chinese cloths and Brazilian sugar and coffee and… In each case, FOREX impacts the prices. If you trade stocks out of your home currency zone, then you have a FOREX component to the securities. etc.

    So just treat it like anything else and let the charts be your guide.

    FWIW, I pretty much always look at the FOREX chart for a country along with the ETF for that country to see how much of the movement is the stock market there and how much is just the currency. So EWZ and BZF go together. Just like EWC and FXC or EWW and FXM.

    So on this chart:

    http://bigcharts.marketwatch.com/charts/big.chart?symb=ewz&compidx=aaaaa%3A0&comp=gld+eww+fxm+bzf+ewc+fxc&ma=4&maval=25&uf=7168&lf=2&lf2=4&lf3=1024&type=4&size=3&state=15&sid=183966&style=320&time=7&freq=1&nosettings=1&rand=4907&mocktick=1

    At this moment, Brazil is up 1.43%, but the BZF is up 1.01%, that means that over 2/3 of the gain is the currency, not the stocks themselves.

    It’s also interesting to note they are both up on a down day for others… Perhaps a short cover starting?

    So ‘be not afraid’, just don’t trust it till you have some experience at it. In the end, it’s really just another ticker on yet another chart…

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