The trading range or rectangle that we identified back on Tuesday was finally smashed when the pair broke out to the downside. However, the breakout was short-lived since price encountered support around the 0.6530 handle. I think there are three major scenarios here: (1) price is consolidating for an upside move to break past resistance at the 0.6600 major psychological level; (2) price will use the 100 SMA as a dynamic resistance/launching pad to push past support; or (3) price moves sideways while respecting the resistance and support areas we already identified, forming a new rectangle in the process. I personally favor the upside breakout scenario since price getting repelled as it did could be a sign of strong bullish interest. The moving averages disagree with me, though, since they just recently crossed-over into downtrend mode.
Based on its 1-hour forex chart, it looks like AUD/CHF has been consolidating into what appears to be a rising wedge, which suggests further declines for the pair. The intermediate trend is till up, as indicated by the moving averages, but if we zoom out to the higher time frames, we can see that the overall trend for the pair is still down. Stochastic is also pointing down, so forex traders bearish on the pair are possibly in control already. If the bottom of the wedge is broken with convincing and sufficient bearish momentum, then the pair could move lower for around 200 pips since that is roughly the height of the forex chart pattern.
After breaking out to the downside from the ascending channel that we identified back on Thursday, price hesitated a bit when it reached the 1.5200 major psychological level before resuming the down move and ultimately getting repelled at the 1.5060 handle. Now, price is making its way back up, and if we apply our Fibonacci tool, we can see that the most likely pullback area is the 50% retracement level since it happens to sit right smack on the price area of significant market interest around the 1.5200 major psychological level. Also, the 200 SMA could potentially act as dynamic resistance when price reaches that area, and both the 100 SMA and 200 SMA are coming closer together for a potential cross-over into downtrend mode to boot. As usual, though, make sure to practice proper risk management should you find a trade based on this or any of the other charts, alright?
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To get the complete picture and avoid getting blindsided by economic data, you also have to do your fundamental analysis. Lucky for us, Pip Diddy fills us in on what we need to know about fundamentals with his Daily Forex Fundamentals