The CHFJPY is trading sideways after a steep sell-off took this currency pair from its resistance area, visible in light grey in the above H4 chart, down to its support area marked in light blue. The Bollinger Band indicator which support the sell-off is confirming the sideways trend. This currency pair is seeking direction, but the risk remains to the upside. Price action is located between the lower band and the middle band of the Bollinger Band indicator.
A prolonged sideways trend in this currency pair could result in a short-covering rally as forex traders will opt to realize floating trading profits by closing existing short positions. A breakout above the middle Bollinger Band could lead to the addition in new net long positions which may power the short-covering rally into its resistance area. The downside risk remains limited while the upside potential is very attractive.
Forex traders are recommended to enter long positions at 116.50 and below this level in order to take advantage from the expected short-covering rally. Conservative forex traders should wait for a breakout above the middle band of it Bollinger Band indicator before entering their long positions. A take profit target of 122.15 has been set for a potential trading profit of 565 pips on the H4 Chart. More buy orders are expected after the CHFJPY completes its breakout above the middle Bollinger Band.
Forex traders should protect this trade with a stop loss level at 115.00 for a potential trading loss of 150 pips which will result in a Risk-Reward (RR) ratio of 3.77.
Long @ 116.50
TP @ 122.15
SL @ 115.00