AUD/CHF moved higher yesterday, confirming the break above the downside resistance line taken from the high of Mar. 18. The pair is on the verge of forming an inverted Head and Shoulders formation.
With that in mind, despite the break above the upside line, we prefer to wait to complete 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, leading to a trend reversal. This could pave the way towards 0.6973, which was a resistance between May 25 and July 6.
After crossing the resistance, the pair could head towards the peak of May 18, at 0.7030. If the bulls are not willing to stop there either, we could see them targeting the high of May 10, 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 Sept. 21, may signal the resumption of the latest downtrend and could pave the way towards the low of Aug. 20, near 0.6515.
Another break below 0.6515 could see scope for more declines, perhaps towards the 0.6400 territories, marked by the low of Oct. 29, 2020.
