Guest Commentary: AUDUSD Analysis Significant Trade Development
Recent Events: Aggressive rally in the AUDUSD means a bottom is likely in for this correction lower, but a few key levels remain in play.
AUDUSD Analysis – Long and Medium-Term
The trend remains higher for the AUDUSD with the trendline crossing near 1.02. A drop to that level brings the uptrend into question. Moving out to the weekly charts shows the trendline–which began in 2009–does not intersect until very near 1.00. From the long-term perspective this remains a bull market.
(Sorry about all the clutter on the chart. What it all is is clearer on the daily chart shown later)
AUDUSD Weekly Chart with Trendlines and Proprietary Indicator
AUDUSD Analysis – Trading Term Outlook
The AUDUSD rallied aggressively on Thursday after moving into a support area and holding there for the last several days. In the previous analysis this support was called "An area which is likely to present a great buying opportunity." (See analysis fromApril 3)
Also pointed out in the previous analysis was that 1.0260 was likely to be highly significant, and that the low for this move is likely to occur between 1.03 and 1.0260. The actual low came in at 1.0226.
The strategy outlined a couple weeks ago for this last move down was: "I have scattered (buy) orders near 1.03 to 1.0260 with a stop just below 1.02."
Another trade may set up which presents a buying opportunity. This will occur once the pair moves above 1.0465, then pulls back but does not move below the recent low at 1.0226 and then begins to move higher again. So a few things need to occur to trigger another entry signal into the uptrend.
A move above 1.0465 means it is highly probable that higher rates will be seen before a move back below 1.0225. I am continuing to trade this as a longer-term uptrend, with the recent one month decline a correction.
AUDUSD Daily Chart with Trendlines Anticipated support and resistance boxes, Fibonacci Retracement levels and Proprietary Indicator
Seasonality:The seasonal pattern of the AUDUSD dictates that mid-March is usually a bottoming time, and the pair is likely to rally into the early part of May. This is a secondary indicator though. Price action matters much more.
Therefore, it is highly likely all time frames will align very shortly; short, medium and long-term will be up. The pair still needs to move above the recent high at 1.0465 in order to create a higher high and signal that this (short-term) correction is over.
1.0226 is likely the low for this correction, but if penetrated could take the pair towards 1.0025 and the long-term trendline.
AUDUSD Analysis – Trading Environment
The pair is trending. Trending strategies should be used based on the current environment. Buying/selling on new highs/lows may work, but waiting for pullbacks and entering as the pair once again begins to move with the trend is likely more suitable.
Daily Average Movement (2-week): 92.2 pips. Keep this in mind if setting daily targets.
Based on weekday volatility statistics (5 week average), Tuesday and Thursday are usually the most volatile for the pair, averaging closer to 120 pips. Monday, Wednesday and Friday are more likely to be between 80 and 100 pips of movement.
Average Weekly Volatility: Based on a 10 week ATR the pair is moving about 220 pips per week. Keep this in mind when considering whether your targets are likely to be hit next week.
Noteworthy Correlations to Other Pairs: Strong positive correlation to NZDUSD on a daily basis.
AUDUSD Analysis– Trading Strategy at this Time
- Trades are currently in play from prior analyses (April 3 and prior):
- Long anywhere near current levels (1.03 area). Ideal is near 1.03 down to 1.0260.
- Stops below 1.02
Targets at 1.0515, 1.0585 and then another (or others) will likely be determined at a higher price and at a later date as the up move unfolds (if it [continues] to unfold).
With the pair currently trading above 1.04, this trade opportunity has passed, at least for now. Other opportunities may be presented soon though.
As mentioned prior, if 1.0465 is surpassed it is strong evidence that 1.0226 will be the low. Pullbacks which hold above that level are potential buying opportunities. That means waiting for pullbacks to stop and then begin moving higher before going long.
Additional Notes: Being long provides a positive rollover.
Cory Mitchell, CMT
Cory Mitchell is a proprietary trader and Chartered Market Technician specializing in short to medium-term technical strategies. He is the founder ofvantagepointtrading.com, a website dedicated to trader education and market analysis.
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