- In my daily AUD/CHF analysis, I recognize that we have an Australian dollar that has gone straight up in the air for the last couple of weeks.
- It is starting to get overbought by just about any metric that you use.
- The 0.6060 level is the epicenter of previous noisy behavior, so it does make a certain amount of sense that we struggle to get above this region.
Carry Trade
Keep in mind that this is still a bit of a “carry trade”, as you get paid at the end of the session for holding this AUD/CHF pair. It is because of this that I have completely rule out the idea of shorting this market, at least not unless we get some type of major shift in risk appetite. It’s also worth noting that we have pulled back just a bit to show signs of weakness, or perhaps a better word is “exhaustion.”
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If we do drop from here, I believe that the 0.60 level will be very supported, as it is a large, round, psychologically significant figure, and an area that has seen a lot of noise previously. As long as we can stay above that level, then it’s likely that the market could go higher, perhaps reaching toward the 0.61 level, which is essentially the massive “ceiling in the market” currently. That being said, this is a market that I think continues to see a lot of inflows, but I think every once a while you will need to see the market pullback in order to offer enough value to get involved. That’s exactly where I’m at with this pair, and therefore I think stepping back for a couple of days might be the best way to approach it.
That being said, we could break out above the 0.61 level and simply continue going higher. I suspect that you would see the Swiss franc get crushed against most currencies in that environment, and the Australian dollar would just be yet another one punishing it for its low interest rate policy backing it.
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