The following article is a global economic outlook on the financial markets and practical trades that one may take based on the analysis from a fundamental and technical point of view.


The financial markets are still in a mood of uncertainty and a bit on the "fear" side of the trade on the back of weak job numbers in the United States last week. Other factors of fear include the overhang of debt problems in the Eurozone and the noticeable spike in gold prices (as is usual in the markets when risk is off the table) and the strengthening of the Chinese currency over the last couple of months.

These indicators in the market place shows clearly that large fund mangers are either 
(1) Taking risk trades out of the financial markets completely or
(2) Decreasing their exposure to more risky bets in the global financial system. 

In either case it would be wise to follow smart money! So here goes: 

The economic indicators highlighted shows that there are huge swing trade opportunities for the Swiss Franc ( CHF ) as money managers all over the world will move their monetary assets in CHF during a globally stressed financial system.

The USD/CHF can be played to the downside for further weakness keeping an eye on stop levels around 0.82400 (the most recent swing high on a daily time frame).

The Technicals of the trade shows that price is targeting the lows of August 2011 at around 0.70500. If we even consider our theory to be wrong and think that a retracement will occur to the upside, we should appreciate from technical analysis that there will be some sort of attempt to retest the August lows before any major upside moves, and this is what we can capitalize on. 

USD/CAD opportunities

Continuous weakness in the US dollar can be exploited through the USD/CAD pair.
From early August 2011, price on the this chart (on a 1 day time frame) has been trending southwards and retracements to levels around 0.98600 present god shorting opportunities. I will be positioning trades at these levels and looking to short more as the week/s progress. The stop levels will have to be placed near parity as this has presented a huge psychological pivot point on this pair for some time now. The target on this trade will be around 200 pips to the downside or near the recent swing low at around 0.9725. I would not advise a very bearish outlook on this pair as there is a clear double dip and resistance that has formed at around 0.9400.

A note on risk management when swing trading multiple pairs.

It is always a good idea to watch the currency correlations of pairs that you trade in order to avoid trading in the same direction but on multiple pairs. This is a good idea as it can provide some level of diversification within a currency portfolio. 

Good Luck Trading!
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