AUD/CHF fell sharply yesterday during the European morning after the SNB unexpectedly hiked rates by 50bps. This resulted in the break back below the 0.6840 zone, which had been acting as a key support since April 25th, with some small periods of exception. In any case, the tumble met support at 0.6745, and then the rate rebounded somewhat. However, the recovery remained limited below 0.6840, and another slide followed. In our view, this paints a negative short-term picture.

A clear and decisive break below 0.6745 would confirm a forthcoming lower low and may initially aim for the low of March 4th, at around 0.6705. A break lower could carry more bearish implications, perhaps targeting the 0.6650 hurdle, marked by the low of March 2nd. If the bears are not willing to stop there, then we may see them pushing towards the 0.6580 zone, marked by the low of February 24th.

Taking a look at our short-term oscillators, we see that the RSI turned down again and looks ready to fall back below its trigger line, while the MACD lies below both its zero and trigger lines. Both indicators detect strong downside speed and support the notion for further declines in this exchange rate.

In order to abandon the bearish case and start examining a decent recovery, we would like to see a clear break back above the key support zone of 0.6840. This could wake some bulls up and allow them to challenge the 0.6892 barrier, marked by the low of June 13th, the break of which could aim for the high of the day after, at around 0.6940. If that barrier is not able to halt the slide either, then we may experience extensions towards the round psychological figure of 0.7000, also marked near yesterday’s high.


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