Published On: Mon, Feb 13th, 2017

Upside potential ahead for AUDCHF


BackgroundLast Friday the Reserve Bank of Australia released its quarterly Monetary Policy Statement, including updated economic forecasts.

The tone was generally positive, although the forecasts assume “much of the recent increase in the terms of trade and commodity prices will be unwound”.

But analysts have been wrong footed by the rally in iron ore over the last six months and the RBA may be too. Certainly, the current level of the AUD suggests no immediate concerns.

This Thursday we get the monthly labor market report. The RBA’s assessment is that “overall (GDP) growth is not expected to be sufficient to generate much of a decline in the unemployment rate over the forecast period”.

So expectations heading into the report are modest, meaning any upside surprise would boost AUD.

Meanwhile the Swiss National Bank is keeping its head down, tinkering with EURCHF when necessary and holding 3 months Libor steady at negative 0.75%.

Thus CHF has become a reliable funding currency for carry trades, with AUDCHF being one of the more popular, given the RBA’s indication its policy rate is on hold at 1.5% indefinitely.

Management and risk description

The AUDCHF cross has probably completed an eight-month Ascending Triangle (see weekly chart below) with an upside projection toward the 0.8160 level over coming weeks.

Short reactions, whilst holding the Triangle base, may now be rewarded in the weeks ahead.

In the short term, support lies at about 0.7675 and at 0.7640/0.7615 max. to enable rally toward the 0.7825 level over coming days.


Entry: Today – AUDJPY is seen as a buy around the 0.7675 level 

50% just under 0.7650 and 50% just under 0.7610 (both until 0.7720 is cleared)


Time horizon:
Allow several days at least for target o be met

AUDCHF daily chart (click to expand)

Chart: AUDCHF weekly chart (click to expand) Source: Both charts, ThomsonReuters  

— Edited by Adam Courtenay

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