Aussie Dollar - Chart Outlook

Aussie Dollar - Chart Outlook

The 200 day moving average is often a key level for markets. The Aussie fell below it in early February but has since lost momentum.

Taking a tour through Aussie charts in different time frames, leads me to the view that selling into rallies (provided a good risk: reward set up emerges) might be the way to go for swing traders.

Weekly Chart

AUD: USD CFD Weekly Source: CMC Tracker

My main take from the weekly chart is that the Aussie is still inside a large triangle formation. I'd previously thought we may be breaking out when price moved above the dashed resistance line. The more conservative view would now be that the 2nd, thicker resistance line represents the upper boundary of the triangle. It would take a move above that to indicate a breakout.

The triangle scenario creates a real possibility that the Aussie could again be heading down to test the support line. Depending on how long it takes to get there, this may mean a decline to around .980/1.00

The weekly slow stochastic is also still trending down quite steeply (black indicator below red) indicating ongoing downward momentum in this big picture chart.

Daily Chart

AUD: USD CFD - Daily. Source: CMC Tracker

The daily shows price baulking at the 200 day moving average (green line).

The old support trend line also looks like something that may become future resistance if we rally from here.

The daily slow stochastic has just rolled over (black line crossing below red). However, it wouldn't take much of a rally in price to see the  stochastic resuming its uptrend from here.

4 Hour Chart

AUD: USD CFD - 4 Hour. Source: CMC Tracker

On this chart, I've made the case that the move down from the last peak at the triangle resistance around 1.06 has completed a 5 swing move. This sets up for a retracement.

The most recent rally hit the 38.2% retracement level. This is common behaviour for the "a" move in a 3 swing or abc correction so I've labelled this peak "a". If this is correct the retracement has further to go.

If we are to get an abc correction there will eventually be a rally to  peak at "c" which is higher than "a".  Somewhere in the 50-78.6% retracement zone would be a likely target.. Broadly this could imply a rally back to 1.04/1.05 and would fit with a test of the resistance zone around the old uptrend line shown on the daily chart.

The 4 hour stochastic is heading up, supporting this possibility

Trading Outlook 

Putting all this together,  typical trading standpoints depending on a trader's time frame might be:

  • Swing traders using set ups in the 4 hour time frame looking to trade in the direction of the longer term decline in the weekly chart would be waiting to sell rallies in the target zone above "a" if the right set up comes along
  • Short term traders would be looking for buy set ups in the near future to trade in the direction of a rally that may take us back above "a".

If any set ups come to my attention I'll post follow ups to the blog