This week’s price action in the Aussie Dollar pairs looks like something that could develop into a larger correction.
EUR: AUD is a typical example. On the daily chart, price is now well above both its 20 and 50 day moving averages (blue and green lines respectively. The near vertical rise from the trend line is typical blow off behaviour and the fact that the slow stochastic is now starting to trend lower from the oversold zone above 80% provides a clue that a pullback towards longer term trend averages may be underway.
Against this bigger picture background, the 4 hour chart looks as though it may be in the early stages of forming a downward sloping trend channel.
There’s a fair way to go yet but if this situation continues to play out, my trade idea is to sell if price rises to and again rejects the channel resistance. This would involve selling only if price makes a trend peak at the resistance line or close to it. I define a trend peak as a candle high surrounded by lower highs and then a move under the low of the highest candle.
There’s a fair way to go yet but if this situation continues to play out, my trade idea is to sell if price rises to and again rejects the channel resistance. This would involve selling only if price makes a trend peak at the resistance line or close to it. I define a trend peak as a candle high surrounded by lower highs and then a move under the low of the highest candle.
A typical profit objective may be either a return to the channel support or to the 20 day moving average on the daily chart with an init
Ric Spooner is Chief Market Analyst at CMC Markets in Sydney. He has over 30 years experience in derivates markets, and was previously a Managing Director at Sydney Futures Exchange Clearing, General Manager at JBWere Futures and Manager at Elders Futures.
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