The Aussie has worked itself into a triangle type formation today.
I've outlined some strategy thoughts below.
The steep rally into this formation gives it that "flagpole" and pennant type appearance most often associated with a continuation pattern i.e. where traders are looking to buy in anticipation of the uptrend continuing if price breaks through the top.
The higher time frame daily chart suggests scope for the rally to continue. The fast stochastic indicator is still trending up steeply and has not yet hit the overbought zone.
In addition price has just broken up through the 200 day moving average. This average is moving broadly sideways but a break through it gives scope for at least a quick run up.
Returning to the hourly chart - the strategy outlined on it involves:
- Buying on a confirmed break through the top of the pattern. Given that the resistance line is reasonably flat this is one of those occasions where a stop entry order could be used to do this
- Placing an initial stop behind the triangle support
- A profit target which projects the height of the "flagpole" from the lowest point of the triangle
- Changing to a trailing stop once price hits 61.8% of the distance to the projected target