We have been witness to some very aggressive selling of nearly all currencies against the USD in recent sessions. Whilst there has been some let up in this area in the last 2 sessions there are still some very interesting setups to look at in the cross rate area of the market. The one that caught my eye this morning was AUDCAD which has been intersecting the same support and resistance level repeatedly over the last few months. In this post too, I wanted to introduce you to another modified indicator which is a simple derivative of the Bollinger Bands.
The main thing to focus on here is the horizontal support/resistance level running through the chart at 1.0124 which has been respected a number of times which I have marked with arrows as you can see. For this setup I think that the trader would wait for price to respect the level before taking any trade - this would mean that a peak would need to be formed at this resistance level before you have confirmation.
The other thing that I think is particularly interesting here is the Bollinger Band setup which has been modified to show a 200 day moving average and 1.25 standard deviations above and below the line. This can be a very useful indicator when looking at trading ranges over the broad movements of an instrument. I have marked with black arrows a couple of the points where price has respected the range shown by this indicator but you can see that there are a large number of them elsewhere in the chart. The reason why I point this out today is because there is a good chance that this and the support/resistance level may intersect with price which may make for a very interesting resistance level.
If price forms a peak at this level then a short trade would have its stop placed just above the peak. A breach of this level would likely be showing a continuation of the recent trending move - I am not really clear that this is a trade for the long side though as there a number of other negative factors to consider.