The AUD/CHF pair fell during the day on Wednesday, breaking the back of two hammers from the previous sessions. However, you can see that the shooting star that was formed last week has proved itself to be true, as the market pullback. Looking at the chart, you can see that the Australian dollar has been gaining against the Swiss franc for some time, and most of you will not know this, but this market tends to be the inverse of the EUR/AUD pair. Both of these are been trending quite nicely for some time, and as a result I feel that selling this market even though we have a fairly bearish candle is the wrong thing to do. I’m looking for some type of supportive candle below in order to go long.
Nice trend, obvious channel.
This is a nice trend that we have in effect since the beginning of March, so therefore don’t really see any reason to doubt it’s now. The fact that we pullback from where we did doesn’t surprise me either, because quite frankly I believe that the 0.85 level offering resistance is hardly a big deal. Yes, it is a large, round, psychologically significant number, and as a result it makes sense that we could see the sellers come into play. However, I think that this is simply a pullback that will allow us to build enough momentum to finally break out and go higher.
On top of that, keep in mind that the Australian dollar is considered to be a “risk asset” as the Swiss franc tends to be more of a safety currency. With that, this measures the risk appetitive the global markets, rising when traders are fairly confident, and falling when they aren’t. As you can see, much like most of the stock indices in the United States, we have seen quite a bit of risk-taking overall. I believe this trend continues, but we may have a day or two of weakness which should offer value as the Aussie becomes a bit cheap in relation to the Swiss currency.