Potential signal:
- I am a buyer on the bounce. I would get long at the 0.5933 level, with a stop loss at the 0.5870 level.
- I am aiming for the 0.6060 area.
- The Australian dollar has fallen rather significantly during the course of the trading session on Tuesday against the Swiss franc, as we have seen a massive candle form.
- At this point, the pair looks as if it is threatening the 0.59 level, an area that obviously is a large, round, psychologically significant figure, but it is also backed up by the 200-Day EMA.
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Keep in mind that this pair is highly volatile at times, but the fact that we have fallen the way we have is a bit surprising. After all, these are huge candlesticks over the last couple of days, it certainly looks as if “the bottom has fallen out” of this currency pair. At this point in time though, we are at a place that could be major and its implications.
Technical Analysis
The technical analysis is still technically bullish, but the reality is that we need to make a move to the upside soon. I believe at this point it’s more or less about being “risk off”, but at this point the 0.59 level looks as if it is going to be crucial battleground. The 200-Day EMA racing toward that area also has a major influence, so I think at this point it’s likely that we turn around and bounce, if we can get some type of calm to the financial markets.
On the other hand, if we were to break down below the 0.85 0.5850 level, then it’s possible that we could plunge quite drastically. This would obviously be a major “risk off move”, which of course the world is trying to digest the idea that perhaps the global economy is in the strongest people thought. Quite frankly, it’s a bit surprising, considering that anybody who actually goes to the grocery store can tell you that inflation is an issue. However, Wall Street and Canary Street both have completely ignored reality, and this is what you get. I have seen this happen multiple times in the past where markets talk themselves into being bullish, despite the fact that there’s no real underlying strength. That being said, the interest rate differential between Australia and Switzerland remain very wide, and I still think it favors the upside sooner or later.
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