Technical Analysis AUD/CHF May 29, 2019
The Swiss government will not raise the economic growth forecast for the current year, despite the fact that GDP data for the 1st quarter of 2019 was positive. In annual terms, the economy grew by 1.7%, while the forecast for the whole year is only + 1.1%. Probably, the Swiss government fears the situation will worsen by the end of the year. Its current forecast is noticeably less than GDP growth in 2018 (+ 2.6%) and historically average (+ 1.7%). In order to continue monetary stimulation of the economy, the National Bank of Switzerland is not going to raise the rate at its next meeting on June 20. It is now minus (-0.75%) and is the lowest in the world. On the 3rd of June, Switzerland will release inflation data for May, which could affect the franc. In turn, the main positive for the Australian dollar is the outlined normalization of trade relations between the United States and China, as well as the strong increase in iron ore prices in China. On June 4, a regular meeting of the Reserve Bank of Australia will be held. Market participants expect a reduction in the rate from 1.5% to 1.25%. This is the main risk for the Australian dollar. However, some investors believe that such an event has already been taken into account in current quotes.
On the daily timeframe, AUD/CHF: D1 exited the downtrend upward. Various technical analysis indicators have generated upside signals. Further growth of quotations is possible in case of publication of positive data in Australia and negative data in Switzerland.
- The Parabolic indicator gives a bullish signal.
- The Bollinger bands® started expanding, indicating volatility increase.
- The RSI indicator is below level 50. It has formed a divergence to the increase.
- The MACD indicator indicates an uptrend signal.
The bullish momentum may develop if AUD/CHF exceeds its last fractal high at 0.7. This level may serve as an entry point. The initial stop loss may be placed below the last two lower fractals and the Parabolic signal: 0.689. After opening the pending order, we shall move the stop to the next fractal low following the Bollinger and Parabolic signals. Thus, we are changing the potential profit/loss to the breakeven point. More risk-averse traders may switch to the 4-hour chart after the trade and place a stop loss moving it in the direction of the trade. If the price meets the stop level (0,689) without reaching the order (0,7), we recommend to cancel the order: the market sustains internal changes that were not taken into account.
Summary of technical analysis
- Position Buy
- Buy stop Above 0,7
- Stop loss Below 0,689
Market Overview
US stock market ended lower on Tuesday as trading resumed after markets reopened following Memorial Day holiday. The S&P 500 lost 0.8% to 2802.39. Dow Jones industrial fell 0.9% to 25347.77. The Nasdaq slid 0.4% to 7607.35. The dollar strengthening continued as Conference Board’s consumer confidence index rose to above expected 134.1 from 129.2 in April. The live dollar index data show the ICE (NYSE:ICE) US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, rose 0.2% to 97.925 but is lower currently. Futures on US stock indices point to lower openings today.
European stocks pulled back on Tuesday led by Italian stocks on renewed concern about the country’s refusal to curb budget deficit as Brussels demands. Both the EUR/USD and GBP/USD resumed their slide and are lower currently. The Stoxx Europe 600 ended 0.2% lower led by banking shares. The German DAX 30 slid 0.4% to 12027.05 as German GfK consumer sentiment index fell to its lowest level in two years. France’s CAC 40 lost 0.4%. UK’s FTSE 100 slipped 0.1% to 7268.95 after reopening.
Asian stock indices are mostly lower today. Nikkei fell 1.2% to 21003.37 as yen resumed its climb against the dollar. Chinese stocks are mixed after President Donald Trump’s Monday comment that the country was “not ready” for a trade deal with China: the Shanghai Composite Index is up 0.4% while Hong Kong’s Hang Seng index is 0.4% lower. Australia’s All Ordinaries Index gave back all of the previous session gains declining 0.7% with Australian dollar flat against the greenback.
Brent futures prices are edging lower today. Prices of July Brent ended unchanged at $70.11 a barrel on Tuesday.