Is my understanding correct - EUR/CHF

Beginner Questions
1

Hi all, and thank you in advance for reading.

New to forex, I have a few understanding questions. The biggest area of misunderstanding for me is my last question in this post:

COT:

Currently looking at the EUR/CHF, in particular the bearish channel it has been bouncing around in from Feb/April 2018 to present.

Looks like the EURCHF is bouncing off the channel support at the moment, and may increase towards the top of the channel (resistance).

Looking at the COT report for EUR it appears Non-commercials are closing shorts and adding longs. Am I correct in interpreting this as possiblly being a bullish sign for the EUR?

Looking at the COT report for CHF is appears Non-commercials are adding shorts, much more so than longs, so I interpret this as being bearish on CHF.

So if I were just looking at COT report, am I correct in thinking the EUR should strengthen against the CHF, which on a EURCHF chart, would be an upwards trend - more CHF required to buy a EUR? This would support an upwards bounce off the channel although I know I’d need to look at other indicators

Sentiment:

Secondly I’d like to tie this to my (mis)understanding of sentiment reports, which I’m going to use as a contrarian indicator. I’m using IG index (retail) client sentiment data which shows EURCHF as

Net Long: 74% -6% Daily change / +6% weekly change
Net Short: 26% -18% Daily change / +62% weekly change

This clearly shows retail clients are Net Long, so I’m inclined to be short. How would you interpret the large net weekly change in shorts?

And secondly - when I say above that retail clients are net long - does this mean that they are bullish on the EURCHF chart (i.e. upwards trending) or that they are long/bullish on CHF when compared to EUR, which would be downwards trending on the EUR/CHF chart - this is what I’m struggling with most to get my head around?

Many thanks for all your help

Darryl

2

I spent months studying the COT reports only to find that they were useless to me. Every week i documented the longs, shorts and changes hoping to find something I could use. All I learned was that the results are just 3 days behind and most of the moves were over by the time the reports were published. So, I stopped looking at them. In fact I stopped looking at everyone’s projections and just started looking at the charts and trading for myself.

So, let’s take a look at the chart you are referring to on the weekly view:

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There’s no way I would be looking at any longs here because the chances of getting stopped out compared to going short are much higher. Even if price were to climb up the the top of that descending channel, it wouldn’t go up much, just sideways, so I would wait for weeks, even months until it got there and then start looking for a short opportunity. As you can see I’m expecting this to keep going down.

However, this all depends on your style of trading. Scalpers don’t pay much attention to the higher time frames, but since you’re looking at the COT reports I am thinking you’re more of a swing trader like me.

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3

No matter who’s doing what, EUR/CHF is still falling. At some point it will stop falling, but that doesn’t mean its immediately a buy. The most likely thing a downtrend will do next is continue: the least likely thing is immediately reverse. There will be time to get long when the big money is buying this. We’ve all had 2 years to get short, there’s always time.

Most private retail clients are guessers. My broker reports that 76% of their clients are losing money, so I wouldn’t give much credence to what those guys think of EUR/CHF.

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4

Something else worth paying attention to as well would be the currency indexes. Analyzing these charts can sometimes give you ideas on whether the currency is going to strengthen or weaken.
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5

Many thanks for your replies, much appreciated - just starting out and experimenting on demo accounts with various strategies and methods, but you’re right, I’m leaning more towards swing trading, seems to fit more my style.