Top Currency Mover of the Week: AUD/CHF

Fundamental Outlook (AUD/CHF)

The Aussie was the worst-performing currency of the week. The first round of weakness was very likely due to the RBA meeting minutes. Lower demand for higher-yielding currencies like the Aussie due to risk aversion at the time may have been a factor as well. But given that the Aussie lost out to the Kiwi, another high-yielding currency, the RBA meeting minutes was the more likely culprit.

As for the specifics, the minutes didn’t explicitly provide any forward guidance. But they did slightly tweak their statement on interest rates.

This is from the July meeting minutes:

“Low interest rates were continuing to support household spending and the lower exchange rate since 2013 had continued to assist the traded sector of the economy”

While this is from the August meeting minutes:

“Low interest rates and the depreciation of the Australian dollar since 2013 were expected to continue to support the necessary adjustments in the economy.”

The implication for that little tweak is that the RBA still has an easing bias. And as usual, the RBA also tried to talk down the Aussie, saying that “an appreciating exchange rate could complicate” the adjustments in the economy.

Another point worth, er, pointing out is that the RBA is expecting Australia’s Q2 GDP growth to be “more modest” relative to Q1’s solid reading. And that, as well as expectations of persistently low inflation, give the RBA meeting minutes a slightly dovish vibe.

Moving on, the Aussie stabilised ahead of and later shot up when Australia printed solid employment numbers. However, there was no follow-through buying (and lots of follow-through selling) likely because the details of the jobs report were not as stellar as the headline numbers. Also Moody's warn may also cut the credit rating of Australia’s top banks, and not just their outlook.

Overall, a pretty bad week for the Aussie, so much so that the rise in iron ore prices during the week was not able to provide the Aussie with any support.

As a safe-haven currency, the Swiss naturally got some much needed loving. And that’s probably the only thing that drives the Swiss higher since price action on most Swiss pairs was actually kinda messy.

Source: Babypips.com

Technical Outlook (AUD/CHF) Weekly Chart



Indicators: Bearish (50 sma below 200 sma)

Price action: A rounding bottom formation can be seen on the chart, and price broke out of a long-term downtrend line.

Summary: I am currently rather neutral on this pair as I want to see if either the critical support level at 0.72033 can be broken down to more downside or the resistance zone at 0.75650 - 0.77360 can be taken out to more upside.