AUD/CHF Forecast: Defends Support As Bullish Flag Forms

The Aussie has rallied a bit against the Swiss franc on Thursday, as we are looking at the risk appetite of global markets rocking back and forth.

AUD/CHF

The Australian dollar has initially dropped a bit against the Swiss franc, but the 0.5680 level, an area that's been important previously, has offered support as the market memory from the previous resistance came back into play. The interest rate differential continues to favor the Australian dollar, and, of course, the Swiss National Bank has made it clear that they do not like a strong Swiss franc and they are seemingly committed to a 0 interest rate policy.

In this environment, it does make a certain amount of sense that we would continue to see upward pressure, and if global risk appetite continues to build up, that also helps. It's worth noting that the uptrend started several months ago, and while the market does go sideways from time to time, as is the case with a lot of Swiss franc-denominated pairs, the overall trajectory continues after a little bit of accumulation.

Interest Rate Differentials and Bullish Flag Structure

The question now is whether or not we are in accumulation, or if we are going to start to pick up momentum. I suspect we should know over the next couple of days, but either way, the one thing that sticks out to me on this chart is just how feckless it would be to short this pair at the moment. If we do start to see this pair break down significantly, it almost certainly would be some type of reaction to a nerve-wracking event, some type of problem geopolitically in the world, for example.

But even that, I think, might have to be something new, because, quite frankly, I think the world is starting to get used to the idea of the Middle East being a mess. That's just not new news, and as a result, it just doesn't have the same effect on trading as it once did. All things being equal, this looks like a bullish flag.