The AUD/CHF pair is showing early signs of forming a recovery base, supported by fundamental strength, improving sentiment, and initial technical signals. In this article, we examine why conditions are becoming more favourable for an upside move in AUD/CHF.

Fundamental Analysis

Australia’s macroeconomic backdrop is more resilient compared to Switzerland:

• GDP Growth: Australia posted quarterly GDP growth of 0.6%, outperforming Switzerland’s slower 0.2%.
• Inflation: Australia’s inflation rate remains higher at 2.4% year-on-year compared to Switzerland’s exceptionally low 0.3%.
• Labour Market: Unemployment remains tight in both economies (Australia 4.1%, Switzerland 2.9%), although Australia’s broader economic momentum is stronger.
• Monetary Policy: The Reserve Bank of Australia holds its interest rate at 4.1%, compared to the Swiss National Bank’s much lower 0.25%. This large interest rate differential strongly favours the Australian dollar.

On broader economic indicators:

• Current Account: Australia’s current account shows a deficit (-2.1% of GDP), while Switzerland boasts a surplus (7.6%). However, Swiss authorities have shown little inclination to strengthen the franc aggressively through intervention.
• Consumer Confidence: Australian consumer confidence is robust at 90.1, compared to deeply negative sentiment in Switzerland (-34).
• Manufacturing PMI: Australia’s manufacturing PMI is 52.1, indicating expansion, whereas Switzerland’s sits at 48.9, reflecting contraction.

Overall, Australia’s higher inflation, better growth outlook, and strong carry appeal through interest rate differentials make the AUD fundamentally attractive against the CHF.

Sentiment Analysis

The latest Commitments of Traders (COT) report shows that traders are still modestly net short AUD and net long CHF. However, risk appetite has been improving globally, favouring higher-yielding currencies like the Australian dollar.

Other sentiment factors:

• As risk sentiment improves, traditional safe havens like the Swiss franc tend to lose appeal.
• Commodity prices have stabilised, which supports demand for commodity-linked currencies such as the Australian dollar.

The market is beginning to rotate back towards higher yielders, setting up favourable conditions for AUD appreciation against CHF.

Technical Analysis

The daily chart for AUD/CHF reveals early recovery signs:

• Ichimoku Cloud: Price remains below the cloud, confirming that the overall trend is still bearish. However, the future Kumo is narrowing, suggesting that bearish momentum is slowing.
• Conversion and Base Lines: The Conversion Line has started to flatten, indicating early stabilisation.
• RSI: RSI sits at 39.23, which is in bearish territory but is turning upwards, showing improving momentum.
• MACD: Although still negative, the MACD histogram is shrinking, and the MACD line is rising towards the signal line, hinting at weakening bearish pressure.
• Candlestick Price Action: A recent bullish engulfing candle suggests buyers are attempting to defend the lows.

Volume has picked up on recent green candles, confirming genuine buying interest and signalling that a base could be forming.

Conclusion

The outlook for AUD/CHF is becoming increasingly positive, with macroeconomic fundamentals, a more favourable interest rate environment, improving sentiment, and technical signs of bottoming all pointing towards potential upside.

While the pair remains below the Ichimoku Cloud, suggesting caution is still warranted, early buyers may find a favourable risk-reward setup if the recovery gains traction. A decisive break above the Base Line would further confirm the bullish reversal.

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