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One of the great things about Fibonacci RETRACEMENTS is the mere fact that you don’t have to pick the bottom in order to get a good risk to reward on a particular trade. You have the luxury of WAITING for PRICE to tell you that a move is starting. Then, it is just a matter of time, after the move up, for it to RETRACE or PULLBACK to a Fibonacci number where you are ready to enter.

If you miss the Fib number entry at .382, .618 or .786 (thank you Larry Pesavento), you can always get in on the break above the previous high for confirmation.

You always have the option of jumping in as soon as PRICE hits support, but you will endure the eventual pull back (and the growing negative in your P/L).

If you are an Elliott Waver fan like I am, what I am talking about is getting in on the wave 2 pullback or getting in above a break above the wave 1 high with a stop below wave 1 just under support. For those of you that don’t have a clue what I am talking about, there are 5 waves in the direction of the trend, being in a trade at wave 2 is a good thing.

To the matter at hand, EUR/CHF is completing its correction toward a 2 year rising channel lower trend line. Driven by carry trade interest rate differentials and a robust Eurozone economy, this trend is well established as indicated by the Daily Chart (see below). Yes, the finance ministers are complaining that higher EURO exchange rate is making exports more expensive and slowing growth. But let us remember that the ECB’s (European Central Bank) mission is to insure price stability not to promote growth.

On the other hand, the U.S. central bank’s mission is to both foster growth and price stability. That is why the US is cutting rates. With inflation rearing its ugly head in the Eurozone and the only reason that the ECB did not raise rates was to insure there was plenty of liquidity during the subprime shocks, any reduction of further shocks will allow the ECB to continue to raise rates to combat inflation.

What we are are looking to do is to wait for a bounce at the rising trend line and look for a Fibonacci retrace that will provide a favorable risk to reward entry.

Place EUR/CHF on your watch list and post your questions. This will be one we can follow together as it unfolds.

Our target will be the top of the channel around the 1.6900 area. We can hone our entry with a 4 hour chart. Stay tuned…..Gregory

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