Trade Watchlist: AUD/CHF Rising Wedge

I’ve taken a particular interest on the Swiss franc these days since a national referendum on tax reform will be held in Switzerland this month, and I’m hoping to catch a breakout on AUD/CHF. Take a look!

AUD/CHF Trade Idea

On the pair’s daily time frame, I’m seeing a neat rising wedge formation as Aussie bulls gradually push price higher while franc bears slowly gain traction. Price seems to be consolidating ahead of the tax referendum since its outcome would affect several thousands of multinational companies and investors taking advantage of low tax rates in the country.

With the upcoming vote, Switzerland is at risk of losing these tax breaks in certain areas for foreign companies in exchange for unified rates across the country. Those who support this reform argue that the Swiss economy cannot stay too generous for too long, but many are worried that giving up this favorable tax environment could mean losing jobs and significant government revenues.

AUD/CHF Daily Forex Chart

AUD/CHF Daily Forex Chart

To top it off, the SNB may no longer feel the pressure to keep the franc weak once multinational companies pull out or scale down operations in response to tax reform. According to research institute BAK Basel Economics, the Swiss GDP could shrink by 5.6% and the economy could shed around 175,000 jobs if these companies move their operations elsewhere.

I’m gonna keep an eye out for an upside wedge breakout above the .7650 minor psychological resistance for AUD/CHF and probably aim for around a thousand pips as my profit target, which is the same height as the wedge formation. I’ll set my stop below the wedge support at .7350 for close to a 3:1 return-on-risk if I’m able to hop in.

As always, don’t risk more than 1% of your account on a single trade and make sure you read our risk disclosure if you’re thinking of taking the same setups.

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