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With trade tensions back in the spotlight, I’m keeping my eyes locked on this long-term Aussie setup. Think I’ll have a chance to catch a short play?

Short AUD/CHF Idea

This pair formed higher lows and lower highs on its daily time frame, creating a symmetrical triangle pattern. Price is currently bouncing off support around the .7100 handle and could be due for a move to the top while stochastic pulls out of the oversold region.

I’m not exactly Aussie bullish, though, so I might hold out for a test of the triangle resistance for a chance to short. Of course I’m also on the lookout for a possible break of the bottom, which might be followed by a selloff that’s the same height as the chart pattern.

AUD/CHF Daily Forex Chart
AUD/CHF Daily Forex Chart

The RBA may have kept interest rates on hold during this week’s policy statement, but central bank officials seem to be keeping the door open for a possible cut.

In particular, their official announcement highlighted downside risks from international trade and lower-than-expected inflation. Policymakers also noted that they’ll be keeping close tabs on employment data to gauge if adjustments are needed.

Resurfacing trade tensions on Trump’s latest set of threats on China could also wind up hurting the higher-yielding Aussie on risk-off flows and a likely dip in business sentiment.

I’m still a bit wary about taking a long position on the Swiss franc mostly because of the SNB’s currency intervention tendencies. A downside triangle break for AUD/CHF would put the pair in uncharted territory, dangerously close to levels reached during the 2015 SNB shocker.

Because of that, I’m partial to shorting on a test of the triangle top and aiming for the bottom of the chart pattern versus trying to catch a long-term downside break. Or do you think I should look at a different counter currency altogether?

Happy

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