The AUDCHF has been trading in a rectangular chart pattern as visible in its H4 chart. This currency pair then launched a sharp rally and formed a bump-and-run reversal pattern which points to future consolidation. The last two candlestick patterns formed a hammer as well as inverted hammer around the most recent top which is another bearish indicator.
MACD has confirmed the rally and remained strong through the advance. Look out for a potential shift in momentum to the downside as the correction unfolds. RSI has been trading in extreme overbought territory and a breakdown from this level should accelerate the sell-off.
We recommend a short position at 0.9710. This will be an addition to our initial short position we took on February 13th at 0.9481. We also advise clients to place a buy stop order using half the total volume of the short positions at 0.9760.
Traders who wish to exit this trade at a loss are advised to place their stop loss level at 0.9760. We do not use stop loss levels and will execute this trade as recommended. Place your take profit level at 0.9600.
Here are the bearish factors which should cause this pair to correct
- Bump-and-Run Reversal Pattern
- Currency pair formed hammer as well as inverted hammer formation
- RSI in extreme overbought territory
- AUD will feel negative impact from Chinese slowdown
