[Closed -200 pips] Saturday May 24th Update | AUD/CHF TRADE PLAN
UPDATED: May 24, 2025
May 24, 2025 update: Global trade tensions flared up as the US is talking about new tariffs against the EU, even on things like iPhones. This has spooked investors, and our plan really relied on the US-China trade truce holding. As a result, traders are moving into the Swiss Franc due to its safe haven status.
There is a possibility that the Swiss Franc will get stronger as money flows to safety, while the Aussie Dollar will probably take a hit.
The trade will continue to be evaluated but an early abort as markets open next week is being considered.
Monday May 19th Update: The trade has lost some appeal as the US got its credit rating downgraded. That’s made the markets nervous, and Swiss Franc buyers may step in. The next few days will be critical to see how far the risk off moves go.
Unpacking AUD/CHF: Past Volatility and Future Potential
From November 2024 to mid-May 2025, the AUD/CHF pair's movements have largely reflected global risk sentiment, particularly concerning US-China trade relations, and expectations regarding central bank actions.
Looking back, it was fairly steady around 0.5700-0.5800 in November '24, then mostly traded between 0.5550 and 0.5750 through December and January. A bigger drop started late February '25, bottoming out near 0.5100 in early April. That dive was mainly because US-China trade war fears were high, which boosted the safe Swiss Franc and hit the Aussie Dollar due to worries about global growth. But then, after finding its footing, it bounced back strongly through April and early May as US-China trade tensions eased, with a temporary truce announced around May 12th. Right now, in mid-May '25, AUD/CHF is around 0.5415. A fair price is situated between 0.5350 and 0.5450, and reflects several counteracting factors: optimism stemming from a trade truce, anticipation of a potential rate cut by the Reserve Bank of Australia (RBA), concerns regarding China's economic outlook, and the Swiss National Bank (SNB) maintaining low interest rates.
So, looking ahead for the next seven weeks to early July, the AUD/CHF's path will likely still hang on to whether that US-China trade truce holds up. If it does, and markets feel a bit more adventurous, the Aussie Dollar (which is tied to commodities) could get a lift from better global growth prospects and maybe firmer commodity prices. China’s efforts to boost its economy could also help. On the flip side, the Swiss Franc's usual shine as a safe haven might dull if trade stays peaceful. And with the SNB still expected to keep rates low (they cut to 0.25% back in March), this could also limit the Franc’s strength if global jitters fade. So, AUD/CHF could rise if trade optimism continues, commodity demand is strong, the RBA holds its 4.10% rate (assuming Aussie data is decent), and the SNB stays dovish.
However, there are definitely risks it could fall. If US-China trade tensions heat up again, especially with a key deadline soon, money might flow to the safer Swiss Franc, hurting the Aussie dollar. Weak Australian economic news or a slow recovery in China would also push the Aussie down. Big global worries or a surprise from the Swiss bank could do it too. Plus, the Swiss Franc is seen as a solid bet in uncertain times, so it'll be tough for the Aussie to rally against it in those conditions.
Executing the AUD/CHF Strategy: Entry, Exits, and Weekly Vigilance
Considering the overarching market theme—the US-China trade truce and its implications—and the fundamental characteristics of the AUD and CHF, a cautiously optimistic approach to AUD/CHF may be warranted over the next seven weeks, aligning with the potential for improved risk sentiment if the trade truce holds. The RBA's cash rate at 4.10 percent versus the SNB's policy rate at 0.25 percent provides a significant positive carry for long AUD/CHF positions.
The trade plan is predicated on the assumption that the US-China trade truce generally remains intact, fostering a relatively stable or improving global risk environment.
Proposed Trade: Long AUD/CHF
Entry Level: Consider entry near the current level or on a slight dip towards the lower end of the recent fair value range, for example, around 0.5380. This allows for some potential near-term CHF strength or AUD consolidation to play out.
Stop Loss: A 200-pip stop loss would be appropriate.
Take Profit: An achievable take profit target could be set around 0.5680. This aims for a move towards the upper part of the consolidation range seen before the March decline and is well below the more formidable November 2024 resistance at 0.5820. This target offers a risk-reward ratio of 1:1.5.
Key weekly considerations that could warrant an abort of this trade plan include:
Week 21 (May 19 - May 23): Monitor the RBA Monetary Policy Decision (May 20). Unexpectedly dovish commentary or a surprise rate cut would undermine the AUD. Key inflation data from the UK (April CPI, May 21) and Japan (April National CPI, around May 23), along with Flash Purchasing Managers' Indices (PMIs) from the US, Euro Area, and UK (all on May 22), will shape global risk sentiment. Any immediate negative developments in US-China trade rhetoric would strengthen CHF. The G7 Finance Ministers and Central Bank Governors' Meeting (May 20-22) could also bring relevant headlines.
Week 22 (May 26 - May 30): Focus will be on the US Q1 GDP (second estimate, likely late in the month) and April Core PCE inflation (typically late month/early next). Weaker US data could heighten global recession fears, boosting CHF. Australian data such as Q1 Construction Work Done, April Monthly CPI Indicator, Q1 Private Capital Expenditure, and April Retail Sales will be important. Chinese Industrial Profits (typically mid to late month) will also be relevant for AUD sentiment.
Week 23 (June 02 - June 06): The European Central Bank and Bank of Canada interest rate decisions will influence broader market sentiment. Key US data includes the May Employment Situation report (typically first Friday of the month) and ISM PMIs. Australian Q1 GDP (usually early June) will be critical. Any signs the US-China truce is fraying ahead of the July deadline would be a major concern.
Week 24 (June 09 - June 13): US May CPI data (typically mid-month) will be crucial for Federal Reserve expectations. The European Commission's stakeholder consultation on new EU countermeasures against US tariffs closes on June 10; any announcements could shift trade dynamics. Monitoring of US debt ceiling negotiations will intensify.
Week 25 (June 16 - June 20): The FOMC meeting (with its Summary of Economic Projections, typically mid-June) is paramount. The Bank of Japan and Swiss National Bank also usually have mid-to-late June meetings. Any hawkish surprise from the SNB or dovishness from the RBA (if not already acted) would pressure this trade. The G7 Summit in Canada could also bring trade-related headlines if scheduled around this time.
Week 26 (June 23 - June 27): The data calendar may thin slightly, but focus will remain on any further US-China trade developments as the July 9th US tariff pause expiry nears. US final Q1 GDP and May PCE inflation (typically late month) will also be important.
Week 27 (June 30 - July 04): Markets will be highly sensitive to rhetoric regarding the US tariff pause expiry. The US Independence Day holiday (July 4) may lead to thinner liquidity towards week's end. Key data includes US June employment data (if released very early July or late June) and potentially early June PMIs from various regions.
Key Takeaways
This pair really reacts to big world news, especially anything about US-China trade – keep a close eye on that. The difference in what the Australian and Swiss banks are doing with interest rates can offer chances, but big scares in the market can wipe those out fast. Also, watch out for upcoming events; they could mean you need to change your trading plan or even scrap it. And most importantly, always manage your risk, like using a stop-loss. Being flexible and staying on top of global events is super important.