AUD/CHF traded higher yesterday, confirming the break above the downside resistance line taken from the high of March 18th. What’s more, it looks to be forming an inverted Head and Shoulders formation, which is not completed yet. With that in mind, despite the break above the upside line, we prefer to wait for the completion of the reversal pattern before we start examining a potential positive reversal.
A clear break above 0.6865 may confirm the break above the pattern’s neckline and thereby, a trend reversal. This could initially pave the way towards the 0.6973 zone, which provided resistance between May 25th and July 6th, the break of which could target the peak of May 18th, at around 0.7030. If the bulls are not willing to stop there either, we could see them targeting the high of May 10th, at 0.7100.
Shifting attention to our daily oscillators, we see that the RSI lies above its 50 line, but it has just ticked down, while the MACD remains above both its zero and trigger lines, still pointing up. Both indicators detect positive momentum, but the fact that the RSI ticked down adds credence to our view of waiting for the completion of the inverted head and shoulders.
On the downside, a dip back below 0.6660, marked by the low of September 21st, may signal the resumption of the latest downtrend and could pave the way towards the low of August 20th, near 0.6515. Another break, below 0.6515, could see scope for more declines, perhaps towards the 0.6400 territory, marked by the low of October 29th, 2020.
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