News

Aussie 200 at a tipping point across timeframes

CMC Markets

As I have often suggested in the past I think it's very important to look at potential trades across a range of different timeframes so you can most readily identify points of support and resistance that may interrupt price trends that you are aiming to capture. As you would imagine when you get alignment across different timeframes it can give you the expectation that you may be about to witness a shift in the market. I think we are at one of those points now on the Aussie 200. In recent weeks the bears have been suffering 'death by 1,000 cuts' as the market has slowly but surely been ratcheting higher. We are getting to a level now though where there will need to be some decently positive news to drive us further or gravity may start to take over.

As you can see now the market is about 60 points away from the level which has proved tough to break a number of times for the market in the past. Take note of the 200 week moving average and the modified Bollinger Bands that surround it. The volatility levels have dropped significantly (which is why the bands have narrowed) and the price is around the 200 week MA. This means that there is little in the way of directional trading going on - or to read it another way the trend is weak/non-existent in weekly terms.

The daily chart to my way of thinking has a bearish look to it as well. You can see the bands of the 200 day moving average are running largely horizontal and parallel which would suggest there is a decent probability of a reversion to the mean which is currently around 4,230.

Lastly we look to the hourly which you can see is trading in what would essentially be called a channel. When you keep in mind the state of the previous 2 charts I would remember that there is significant resistance on the upside if that is the direction in which the price eventually breaks. There is more upward momentum on the hourly chart which you can see based on the slope of the 200 hour MA. This will be outdone by the resistance on the weekly and daily chart though so remain mindful of this factor.

I suspect in the near future we will see pressure exerted on the Aussie 200. Whether you agree or not is fine but be sure in your analysis to ensure that your opinion pieces together well with the price action that occurs on higher timeframes than the one you are trading on.


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