The AUDCHF currency pair set the annual maximum of 0.70924 in early April. After that, several attempts were made to bring the price back to the highs, but they were unsuccessful. At the same time, each next local maximum turns out to be lower than the previous one. Does such a pattern mean the transition of the AUDCHF pair into a downtrend?
Due to the end of a price growth for Australia's main export commodity - gold, the national currency of this country is trying to grow primarily by raising the interest rates in the economy. Yesterday the Reserve Bank of Australia increased the key rate by 0.5% to 0.85%, instead of +0.25% as expected.
Despite the prospects of further tightening of Australia's monetary policy in the next months, the AUDCHF pair immediately began to make adjustments to yesterday's growth. After all, the Australian dollar is one of risk-related currencies, and such financial instruments in the current economic conditions are likely to be sold first when there is negative information in global markets.
And the franc is right one of the main defensive currencies. The negative key rate in Switzerland (-0.75%) restrains its rise. However, this situation may change in the near future: The Swiss National Bank session will be held on June 16. The first increase in the key rate in 14 years will make the franc much more attractive among defensive assets, where the US dollar stands out due to the increased rates.
While AUDCHF has not overcome the resistance of 0.707, the scenario of a decline to the Fibonacci levels of 61.8% (0.697) and 50% (0.693) is more likely. It is possible to open a position at the current levels or wait for a new test of the downtrend line from the April maximum.
The trading strategy options are:
1) Sell AUDCHF at the current price. Take profit 1 – 0,697. Take profit 2 – 0,693. Stop loss – 0,7045.
2) Sell AUDCHF when testing the downtrend line (now the level is 0.704-0.705). Take profit 1 – 0,697. Take profit 2 – 0,693. Stop loss – 0,707.
Traders can also use Trailing stop instead of a fixed Stop loss.