Possible Selling Pressure at the Retracement Zone and Upper Range Resistance

Summary:

AUDCHF has retraced back to the 0.618 Fibonacci level, which could add downward pressure, as this area is often seen as a strong retracement zone.

SELL AUDCHF

Close Time

CLOSED

0.58050

Entry Price

0.56300

0.58800

0.56157 +0.00010 +0.02%

51.9

Pips

Profit

0.56300

0.57531

Exit Price

0.58050

Entry Price

0.58800

Fundamentals

In its semi annual Financial Stability Review, the RBA cautioned households against accumulating excessive debt in anticipation of lower interest rates. The report highlights the resilience of the financial system despite the challenges posed by high interest rates and persistent inflation.

The RBA also addressed external risks, such as those arising from an increasingly digitalized global economy, financial imbalances in China, and potential abrupt adjustments in global asset prices that could impact Australia’s financial stability.

During its latest meeting, the Reserve Bank of Australia (RBA) opted to keep the cash rate unchanged at 4.35%, in line with market expectations. The central bank emphasized that inflation remains significantly above its target range, stating, "Inflation is still notably above the midpoint of the 2-3% range."

Despite the recent moderation in Australia's Consumer Price Index (CPI) to 2.7%, the likelihood of any short-term rate cuts from the RBA remains low. The economic outlook is clouded by mixed indicators and the central bank’s firm stance on curbing inflation. As a result, market projections have adjusted, now anticipating only a modest 0.25% rate cut in 2024, a shift from earlier forecasts that had expected more substantial easing.

Inflation data released on Wednesday showed a slowdown in the overall inflation rate to 2.7% in August, bringing it within the target range. Core inflation also declined to 3.4%. Market-based swaps now suggest a 72% probability of a rate cut in December.

On September 26, the Swiss National Bank (SNB) reduced its policy rate by 25 basis points, bringing it to 1%, the lowest level since early 2023. This move aligns with similar actions by the European Central Bank (ECB) and the U.S. Federal Reserve, aiming to lower borrowing costs in response to a marked slowdown in inflation. This marks the SNB's third rate cut this year, following a period of sustained inflation within the bank's 0 to 2% target range over the past 15 months.

This decision comes as Thomas Jordan, the SNB Chairman, nears the end of his 12-year tenure. He indicated that further rate cuts might be necessary in the coming quarters to ensure medium-term price stability. The SNB also revised its inflation forecasts for 2025 and 2026 downward, predicting a consumer price growth of just 0.6% in the second quarter of 2027. Possible Selling Pressure at the Retracement Zone and Upper Range Resistance_1

Possible Selling Pressure at the Retracement Zone and Upper Range Resistance_1

Technical Analysis

The AUD/CHF pair recently reached the 200-period moving average, which could serve as a potential resistance level, given that the price has previously reversed from this zone. On this occasion, the pair has retraced back to the 0.618 Fibonacci level, which could add downward pressure, as this area is often seen as a strong retracement zone.

Looking ahead, the AUD/CHF appears to be forming a range near the upper boundary of this resistance area, with the lower boundary of the channel around 0.5612, a level that coincides with similar price action observed in August 2023. This suggests a possible target to the downside.

Meanwhile, ongoing geopolitical tensions in the Middle East, particularly Israel's direct strikes on Hezbollah positions in Beirut, could escalate into a broader conflict, potentially driving the Swiss franc higher. In times of heightened risk, the franc traditionally strengthens as investors seek safe-haven assets, adding upward pressure to the CHF in a risk-off environment.

Trading Recommendations

Trading direction: Short

Entry price: 0.5805

Target price: 0.5630

Stop loss: 0.5880

Validity: Oct 9, 2024 15:00:00

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