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AUD/USD

AUD/USD

Thomas Long, Course Instructor

One of the classic signals generated by this indicator is Divergence. Positive Divergence is when the market makes a lower low but the MACD makes a higher low. This can often precede rallies off of that low. The opposite signal is Negative Divergence. This is when the market makes a higher high but the MACD makes a lower high and is what we see currently playing out in the AUD/USD.

audusd

 

This pattern often precedes selloffs off of a high. Not always though, as we can see another example of Negative Divergence, before this current setup, in August and September of this year. The MACD printed a lower high while the market kept moving up and still really hasn't looked back. This once again confirms that the direction of the trend on the daily chart should take precedence over any signal generated by any technical indicator. This trend is up and you have to respect that as a trader. But you also have to be aware of these potential hints of a reversal. The key is to look at the market itself for some sort of confirmation of a reversal and potential trend change. This is where identifying major support and resistance levels on the daily chart can offer solid confirmation. The AUD/USD is in an uptrend and as long as it stays above the support level at the .8900 level, it will remain in an uptrend. This has been one of the strongest pairs in this trending move which started in March of this year. However, a move down through the .8900 level would be pretty solid evidence of a potential major trend change for the USD.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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