The AUDCHF currency pair has fallen victim to the Swiss franc’s relentless surge, extending its 2023 losses to over 8%. The key driver of the franc’s strength is the contrasting monetary policy stances of the Swiss National Bank (SNB) and the Reserve Bank of Australia (RBA).
The SNB has already embarked on a rate-hiking cycle, lifting its benchmark rate to 1.75% in December, while the RBA has maintained a more dovish stance, keeping rates unchanged at 2.85%. This divergence is expected to persist in the near future, with the SNB potentially considering further tightening to combat inflation, while the RBA may delay rate hikes due to concerns about slowing economic growth.
The Australian economy, while relatively resilient compared to others, is facing headwinds from the global slowdown and China’s economic woes. This could dampen commodity prices, which are crucial for Australia’s export-oriented economy, further pressuring the AUD.
The AUDCHF’s technical picture also suggests bearish momentum. The pair recently broke below a bearish triangle formation in the 4-hour chart, indicating potential continuation of the downtrend. Price action is trading below the 20-SMA (green line), 50-SMA (blue line) and 100-SMA (orange line), further reinforcing the bearish bias.
Short-term trading opportunities could exist towards the support level at the 0.57385 price level should the downward momentum be sustained. A break above the initial support could leave the 0.57208 support level as the next level of significance for the bears in the short term.
However, the RSI is in oversold territory (23.83), suggesting potential for a temporary bounce. Therefore, short-term trading opportunities could arise towards the initial resistance at 0.57752, should the bulls regain control of the price action and a pullback materialize. A break above the initial resistance would likely bring the 0.57943 and 0.58130 resistance levels into play in the short term.
The AUDCHF pair leans towards a bearish sentiment, driven by fundamental factors favouring the Swiss Franc’s strength. However, oversold conditions on the RSI signal the potential for a corrective move or consolidation. Short-term opportunities could favour bears targeting lower support levels, while a bullish reversal would require a break above the 0.57752 resistance level to signify a shift in momentum.
Sources: TradingView, Reuters, Trading Economics, Market Pulse, The Sydney Morning Herald.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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