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Australian Dollar Breaks Out, Swiss Franc Eyes 0.9300

Australian Dollar Breaks Out, Swiss Franc Eyes 0.9300

2011-02-01 18:06:00
David Song, Currency Strategist
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Australian_Dollar_Breaks_Out_Swiss_Franc_Eyes_0.9300_body_ScreenShot003.png, Australian Dollar Breaks Out, Swiss Franc Eyes 0.9300

Currency

Last

High

Low

Daily Change (pip)

Daily Range (pip)

AUDUSD

1.0144

1.0147

0.9964

171

183

Australian_Dollar_Breaks_Out_Swiss_Franc_Eyes_0.9300_body_ScreenShot002.png, Australian Dollar Breaks Out, Swiss Franc Eyes 0.9300

The Australian dollar broke out of its recent range, with the exchange rate rallied to a high of 1.0147, and the high yielding currency may appreciate further going into the Asian trade as investors raise their appetite for risk. The AUD/USD remains 170+ points higher on the day after moving 152% of its average true range, and risk trends should continue to drive price action for the aussie-dollar as the economic docket remains fairly lightfor the next 12 hours of trading. However, as Cyclone Yasi approaches Australian, the natural disaster could bear down on the exchange rate as it dampens the outlook for future growth, and the exchange rate should consolidate going into Wednesday as the intraday rally remains overbought. Once we see the relative index fall back below 70, we should see the exchange rate work its way back towards the 120-SMA at 0.9956, but the rebound in risk could push the pair higher before we eventually get a small correction in the aussie-dollar. In light of the recent price action, it appears that the head-and-shoulders top we were keeping a close eye will not play out, and price action may trend sideways over the remainder of the week as the shorter-term moving averages (10, 20, and the 50 day) converge with one another.

Key Levels/Indicators

Level/Indicator

Level

Record High

1.0256

10-Day SMA

0.9965

20-Day SMA

0.9957

Daily RSI

61

Upcoming Events

GMT

Importance

Release

Expected

Prior

0:00

LOW

HIA New Home Sales (MoM) (DEC)

--

-0.2%

Currency

Last

High

Low

Daily Change (pip)

Daily Range (pip)

USDCHF

0.9351

0.9456

0.9337

88

119

Australian_Dollar_Breaks_Out_Swiss_Franc_Eyes_0.9300_body_ScreenShot001.png, Australian Dollar Breaks Out, Swiss Franc Eyes 0.9300

The Swiss franc pared the decline from the previous month as the U.S. dollar sold off on Tuesday, and the exchange rate looks poised to test the record-low at 0.9300 as it breaks out of the narrow range carried over from the previous week. The USD/CHF is nearly 90 pips lower from the open after moving 114% of its ATR, and the pair may continue to trend lower over the next 24 hours of trading as investors diversify away from the greenback. In turn, we may see the dollar-franc test 0.9300 for near-term support, but the underlying strength behind the Swiss currency may gather pace going forward as the pair clearly maintains a downward trend. However, as the RSI slips into oversold territory, a rebound in the index should produce a small retracement in the exchange rate, and the pair may look to close the gap from the 120-SMA at 0.9422 if we see price action hold the low at 0.9337. At the same time, the DailyFX Speculative Sentiment index shows retail trades remain heavily net long against the USD/CHF, with the ratio at 5.9, and those attempting to catch the bottom of the recent decline could find themselves on the wrong side of the market as major trend continues to point to lower prices.

Key Levels/Indicators

Level/Indicator

Level

20-Day SMA

0.9570

10-Day SMA

0.9478

Record Low

0.9300

Daily RSI

35

Join us to discuss the outlook for the major currencies on the DailyFXForums

To discuss this report contact David Song, Currency Analyst: instructor@dailyfx.com

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