Over the past week, we have held a consistent interest in the Swiss franc crosses. While this would make sense through the consideration that stability in a currency can be reflected throughout its crosses; it also leverages exposure should we have multiple pending or active positions lined up in the same direction. Therefore, it is important to approach the AUDCHF setup from the perspective of making a portfolio rather than it being a standalone position.
[B] Why Would AUDCHF Hold a Range?
· [U]Levels to Watch:[/U]
-Range Top: 0.8345 (Fib, Pivot, Trend)
-Range Bottom: 0.8140 (Former Res, Fibs)
· There is only so much you can do in avoiding the major swings in risk appetite that have been roused over the past few weeks before you run out of options. AUDCHF has considerable exposure to fundamental-derived price action. This pair is first and foremost highly [correlated to demand for returns or flights to safety](http://www.dailyfx.com/story/trading_reports/dynamic_carry_trade_basket/Risk_Appetite_Put_Off_Its_1239926880288.html). Aside from this all-enveloping theme, scheduled event risk is otherwise controlled. There are few indicators that can guarantee action.
· [AUDCHF](http://www.dailyfx.com/story/currency_crosses/currency_crosses/Australian_Dollar_Crosses_Maintain_Bullish_1239991558510.html) is in the middle of a major transformation for technical activity. Just this week, the pair has called an end to an advancing trend that began with the Mar 10th bullish reversal. Currently the congestion has stepped in before a confirmed reversal; but a retest of the former trendline yesterday seems to confirmed 0.8345 resistance.
[I]Suggested Strategy[/I]
· [U]Short[/U]: Half-sized entry orders will be placed at 0.8310 which is well below the pivot high.
· [U]Stop[/U]: An initial stop of 0.8385 does not cover the absolute highs as a push that high is dangerous. To secure profit, move the stop on the second lot to breakeven when the first target hits.
· [B][U]Target[/U][/B][B]: The first objective equals risk (75) at 0.8235 and the second[/B][B] target will be 0.8050. [/B]
[/B] [B]Trading Tip[/B] – Over the past week, we have held a consistent interest in the Swiss franc crosses. While this would make sense through the consideration that stability in a currency can be reflected throughout its crosses; it also leverages exposure should we have multiple pending or active positions lined up in the same direction. Therefore, it is important to approach the AUDCHF setup from the perspective of making a portfolio rather than it being a standalone position. The strategies for USDCHF and EURCHF presented Monday and Tuesday offset each other; so this is theoretically a controlled risk. However, it is certainly still risky. This pair is in the middle of a possible trend shift. The sharp, plunge through Monday has curbed momentum on a rising trend that has been over a month in the making. However, the pair has yet to confirm a trend reversal; so we continue to form a topping formation. In the meantime, short-term levels are being carved out of this interim price action which allows us to develop a position with reasonable risk reward. We are positioning only to the short-side of this range as a deeper retracement on this trend break is the path of the least resistance. In fact, our second objective can only be made with a range break. If normal market development were our only concern, a reversal could play out with time. However, a high correlation to general risk trends means we will cancel open orders by Friday or should spot hit 0.8140 before we enter.
[B]Event Risk for Australia and Switzerland[/B]
[B]Australia [/B]– The Australian dollar is considered one of the strongest currencies among the majors. A remarkably high interest rate and relatively mild recession makes it attractive to those seeking yield and even those scrambling for safety. However, in the conditions we have seen over the past year and a half, where skepticism and pessimism reign, the market treats outperformers as those with the most to lose. Waiting for the next shoe to drop down under, traders will be looking for signs that the economic contraction will accelerate through the first the first half of this year and subsequently force the RBA to renege on its suggestions that further monetary policy will be more decisive. A round of economic releases will help speculation along, but Friday’s G20 meeting may do the honors.
[B]Switzerland [/B]– In the past 24 hours, the Swiss franc has appreciated quickly against many of its counterparts due to its safe haven status. The currency will no doubt continue to follow the whims of sentiment; but at some point the market will have to consider at what point the SNB will fulfill its vow to prevent further appreciation. Should it come down to a battle of wills (and liquidity) the market is far too large to push around. In the meantime, we have a range of notable economic indicators to keep the market occupied. This week, we have trade data and an investor sentiment survey to measure two important aspects of the Swiss economy: capital flows and foreign demand. After the weekend, the UBS consumption indicator will offer a snapshot of domestic spending and the KOF Swiss Leading Indicator composite will provide a broad reading on economic activity.
[B]Data for April 23 – April 30[/B]
[B][/B]
[B]Data for April 23 – April 30[/B]
[B]Date (GMT)[/B]
[B]Australian Economic Data[/B]
[B][/B]
[B]Date (GMT)[/B]
[B]Swiss Economic Data[/B]
Apr 27
NAB Business Confidence (1Q)
[B][/B]
Apr 23
Trade Balance (MAR)
Apr 29
HIA New Home Sales (MAR)
[B][/B]
Apr 23
ZEW Survey (APR)
Apr 29
Private Sector Credit (MAR)
[B][/B]
Apr 28
UBS Consumption Indicator (MAR)
Apr 30
AiG PMI (APR)
[B][/B]
Apr 29
KOF Swiss Leading Indicator (APR)
[I]Questions? Comments? You can send them to John at <[email protected]>.[/I]