AUD/CHF traded lower on Tuesday after it hit resistance near yesterday’s high of 0.6780, and the upper end of a rising wedge formation that’s been containing the price action since November 14th. According to theory, such patterns tend to be broken to the downside, but we prefer to take the sidelines for now and wait for the actual exit to happen before we start examining where this rate may be headed next.
If indeed the bears manage to overcome the wedge’s lower end, as well as the 0.6745 barrier, we could then see them driving the battle towards the 0.6715 territory, which is near the lows of November 19th and 21st. The rate could rebound somewhat from there, but as long as it stays below the lower bound of the wedge, we will keep watching south. The bears could recharge and eventually break the 0.6715 zone, something that may allow extension towards the 0.6690 territory, near the low of November 14th.
Taking a look at our short-term oscillators, we see that the RSI lies fractionally above 50 and points down, while the MACD, although slightly positive, stands below its trigger line, pointing down as well. These indicators suggest that the momentum may turn negative soon, but as we already noted, we would like to see a dip below 0.6745 before we start examining the bearish case.
On the upside, we would like to see a decisive break above the wedge’s upper bound before we assume that the bulls have gained the upper hand. This could pave the way towards the 0.6805 barrier, which is marginally above the high of November 13th, or the 0.6820 level, marked by the high of the day before. If the bulls do not stop there either, then a break higher may set the stage for the 0.6843 zone, near the peak of November 11th.
