In this blog, we are going to take a look at 7 swing structure, equal leg, and market correlation between AUD/CHF and EUR/AUD.
Some of our members would like to know when EUR/AUD would find a medium term low. To find out a possible inflection zone for EUR/AUD, we will take a look at AUD/CHF, which is the inverse of EUR/AUD. The reason we want to look at AUD/CHF is because it has a more clearly defined structure than EUR/AUD. AUD/CHF shows a 7 swing structure and it still has a scope higher to the equal leg.
First, let’s take a look at the basic structure of 7 swing and equal leg below:
Next, let’s take a look at AUD/CHF chart, overlaid with EUR/AUD, for market correlation analysis below
From the chart above, blue line is EUR/AUD whereas the regular candle chart is the AUD/CHF. We can see how AUD/CHF is inversely correlated with EUR/AUD. The peak in EUR/AUD equals to the low in AUD/CHF, and vice versa.
As we start counting the swing in AUD/CHF, we can see that the structure needs one more high in swing 7. If we measure the distance between swing 1 to swing 3, and swing 4 to swing 7, and we get equal leg of the 7th swing at 0.8717.
From this analysis, we can conclude that AUD/CHF’s rally, and therefore EUR/AUD’s decline (since they are inversely correlated), is not yet done. And we can use AUD/CHF 0.87 as a timing tool for a medium term low in EUR/AUD.
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