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Market Analysis

Technical analysis of AUDCHF

August 05, 2019
BY Michael Stark

The four-hour chart of the Aussie dollar against the franc (AUDCHF) shows us the former’s rapid decline since last month. The current areas on this chart are the lowest since summer 2015. High resistance on H4 AUDCHF is probably the area of 0.695, while low support is less clear. The presence of price close to multi-year lows means that there are few barriers to further downward movement. However, events last time AUDCHF reached the area of 0.655 in July 2015 might suggest the the current zone is a support being tested.

Technical indicators on AUDCHF H4

The typical combination of 20 (from Bands), 50, 100 and 200-period simple moving averages yields a sell signal. Price is below all of these MAs, with a death cross of the 50 and 100 lines at the end of last month. One should monitor the interaction of the 100 and 200 SMAs over the next few periods, because a death cross here as well might drive more momentum downward. The most important area of resistance from MAs is probably the 20 SMA from Bands around 0.673. This coincides with two small-body candles from Friday as well as the 38.2% Fibonacci retracement area.

Bollinger Bands (20, 0, 2) have expanded significantly since the end of last week, particularly the big down candle on Thursday night GMT. This suggests that volatility might remain higher than in the first three weeks of July. Although Bands do not give an oversold signal at the time of writing, the slow stochastic (15, 5, 5) does. Both of the lines on the stochastic are below 10, a clear signal of oversold conditions. On the other hand, there is no sign yet of the main line crossing significantly above the signal line.

MACD (12, 30, 9) supports the generally negative picture. The histogram remains significantly below the signal line within negative territory. So far, no extension has occurred. This is important because an extension in MACD is one of the most reliable signals of oversold conditions bringing continuation. One should monitor readings from both the stochastic and MACD before deciding to sell in such conditions.

Price action and Fibonacci

Recent price action on H4 AUDCHF suggests some buying demand and the possibility that price is close to a bottom. The relatively large tails of this week’s candles so far combine with a number of dojis and near-dojis on Friday. It’s possible that the current candlestick might form part of a morning star or doji morning star. However, one should wait until the completion of this and the next period for confirmation.

Fibonacci retracement areas here are based on the overall downward movement since the middle of July. As noted above, 0.673 is probably the most important area. This is the zone of the 38.2% retracement line. It’s also possible that the 23.6% line might be an area of resistance; however, this would probably be weaker than the higher zone.

Key data points

Tomorrow morning is very important for the Australian dollar. Apart from balance of trade (June), the Reserve Bank of Australia is also meeting to decide its cash rate. Most expectations suggest no more cuts for now and that the rate will remain stable at 1%. Nonetheless, traders should prepare for very high volatility tomorrow morning around 4.30 GMT.

Technical analysis AUDCHF: summary

Technical indicators on H4 AUDCHF generally suggest slowing downward movement. While more losses are certainly possible, a period of consolidation might be likely. Furthermore, one should remember that the RBA’s meeting tomorrow morning could easily upset the current technical picture entirely.

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