We’ve got a solid technical setup to watch on AUD/CHF that flows well with the broader risk aversion themes currently driving the market. Is AUD/CHF ready for a new move lower?
Descending Triangle Break on AUD/CHF?
Looking at the four hour chart of AUD/CHF above, we can see the market has been rangebound since mid-April and price action has been tightening up into a descending triangle pattern. Is the is a coil that is ready to spring up (or down)?
Well, it looks like a downside break is the next move as the pair has broken below the 0.7030 support area and currently testing the 0.7000 major psychological level. It’s a bit too early to tell if this is a legit breakout, especially with the stochastic signaling a short-term bounce may be ahead.
If we do see the bounce, then it makes sense to view this as a potential selling opportunity, not only to play the recent shift in global risk sentiment towards aversion on rising inflation fears, but also next week’s monthly Australia employment update on May 20th. The trend has shown accelerated jobs improvement over the past few months, but with a recent outbreak and fresh restrictions in place in Australia, we may see a slight slowdown in next week’s numbers.
So, we’re watching out for a bounce and bearish reversal patterns in AUD/CHF for a potential short play. If both risk aversion sentiment and weaker-than-expected Australian news/data continues, the odds are pretty good of a downside break gaining momentum with a potential move to the next psychological area of 0.6900 in the medium-to-longer term.
What do you guys think? Is this a true breakout for the bears or will the pair bounce and keep moving higher? Or more choppiness from here?
Let me know in the comments below, and as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.
This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.