The Australian Dollar has been very busy here in the beginning of the week, thanks to three significant data releases out of Australia here in early in the week. The first piece of data was stronger than expected monthly building approvals which came in at their highest level since July 2012. The second piece of data was Australian retail sales which disappointed markets, gaining 0.1% against 0.4% expected. The major piece of news affecting the Aussie early in the week however has been the Reserve Bank of Australia’s rate decision which was announced last night. The RBA kept rates on hold, as expected, but the Australian dollar has rallied today on the perception that the RBA has entered a period of neutral monetary policy.
If that is indeed the case, and there is good reason to believe it is, then the Australian Dollar may begin to see some strength as shorts begin to unwind their positions. One pair with the technical setup to play Aussie strength is AUD/CHF. The pair has been stuck in a major downtrend since March, but starting in June AUD/CHF began forming a descending wedge pattern, which suggests reversal. The pair finally broke the top of the wedge and has also cleared the 200 EMA on the four hour chart, suggesting we may begin to see a strong move higher. Major support is now the wedge re-test at 0.8400, while the move may target 0.90 or even higher. We’re not done with Aussie data this week, with GDP figures to come later tonight, so some caution is warranted.
Written by: Liam McMahon, Currency Strategist – GlobalFxClub.com