AUD/CHF loses momentum after channel break

After tests of 103.44, AUD/CHF took a solid plunge to lose 37% on the weekly scale, but now appears to be reversing and has already recovered part of the losses. The pair established a rising wedge and broke the channel down pattern which was guiding it south, meaning that there might be some clouds in sight for bulls. The Ichimoku cloud, while green, is not wide enough to provide a demand cushion above the broken channel trend-line, meaning that despite the cluster of supports lying just below, flattish tests of the area are likely to lead to at least some bearish characteristics, even if in the short term. A strong bearish signal additionally stems from the prominent falling divergence between the ADX and the current price, along with the pitchfork (not depicted) which has been exited to the downside. It might, however, be the case that the pair has been trying to establish another – tighter - channel instead of the more volatile previous pattern. We will therefore have to watch the patterns closely in order to see where markets sway, keeping in mind that the current setting speaks in favour of upcoming downward pressures. The daily chart tells us that there is not enough momentum accumulated to break below the wedge pattern just yet, but a strong junior channel is leading the cross towards the bottom of the pattern. In case the junior pattern breaks in a motion consistent with a sticky bottom boundary, we will stand strongly in favour of a downturn.