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AUD/USD Reaches Highest Price Level in 3 Months

AUD/USD Reaches Highest Price Level in 3 Months

2016-08-10 15:25:00
Jeremy Wagner, CEWA-M, Head of Education
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Talking Points:

  • AUD/USD reaches highest level in 3 months at .7750
  • AUD/USD is currently resting on a 5 year trend line
  • Use GSI and SSI to provide clues if the trend line may hold or break

AUD/USD has spurted higher reaching the highest price level seen in the past 3 months. The current price juncture is important as the pair tests a 5 year trend line going back to March 2011. The current test of this trend line represents the 7th time it has touched the line. A meaningful break above suggests a change in the mood of the market towards the bullish camp. For bears, this line could represent one more opportunity to position short. Bottom line, something is about to give at this price level.

AUD/USD Reaches Highest Price Level in 3 Months

Chart prepared by Jeremy Wagner

A couple tools to help provide clues if the trend line will hold or break is GSI and SSI. GSI (Grid Sight Index) is useful when price approaches an important level. In this case, since we are approaching an important resistance trend line, we can dial in GSI to ‘m5’ or ‘m10’ and see how previous patterns have played out. GSI is a big data indicator that analyzes millions of price points and identifies patterns that are similar to the current pattern printing.

Use GSI here.

Sentiment, as measured through SSI, has reached its highest level in 4 months and currently sits at -2.0. The number of traders positioned short is at its highest level since March 2016 (see red line on sub chart below). This suggests pressure to the upside and potential break higher. See if traders are buying or selling AUDUSD here.

AUD/USD Reaches Highest Price Level in 3 Months

Bottom line, look for GSI and SSI to work in opposite directions. When they do, you have the 2 tools lining up and confirming one another. For example, if GSI is showing strong topside percentages while SSI is shrinking, then that suggests to look for a bullish break. If GSI is shrinking while SSI is growing, then look for the trend line to hold.

Suggested Reading:

Will the Range Bound Conditions Break? (EURUSD)

DJIA Volatility Drops to 17 Month Lows (Dow Jones Industrial Average)

Are you familiar with one of the biggest mistakes traders make? Find out what it is and how to overcome it here.

Interested in a quarterly outlook for USD or other markets? Download our quarterly forecast here.

---Written by Jeremy Wagner, Head Trading Instructor, DailyFX EDU

Follow me on Twitter at @JWagnerFXTrader .

See Jeremy’s recent articles at his Bio Page.

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

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