By Chloe Edwards, Trade With Precision
The Aussie and Euro have been struggling of late against the U.S. Dollar, with the last 12 months seeing the former sell off 7%, and the latter selling of 5% against the Greenback.
AUD/USD has been trending downwards since the start of the year. In the daily chart below, I can see price starting to make lower highs and lower lows, whilst the moving averages have just recently started showing the preferred geometry for a downtrend – all pointing downwards, with the 10, 20, 50 and 200 MAs lined up in the correct order. I see a level of support at around 0.6770, which could now be tested as resistance, and this level falls within the sell zone between the 10 and 20 period moving averages. The RSI and MACD indicators are converging with price, suggesting that the trend is healthy and there may still be some momentum to the downside. I also see a level of support around 0.6685. This level was tested several times last year, and price has not been much below here since 2009, so I will be showing this level its due respect. I may look for a short opportunity if a small bearish candle forms in the sell zone, but I will be keeping my risk at a minimum in view of the level of support beneath price. If price does break below 0.6685, I will be looking for a pullback to that level, which may yield an opportunity to build on the short position.
EUR/USD has been performing in a similar fashion so far this year, the daily chart below also showing lower highs and lower lows in price action, the moving averages just starting to show better bearish geometry, and the MACD and RSI indicators in convergence. Price is currently sitting just above a level of support at around 1.1000, and I am waiting to see if this level will break before hunting for short opportunities.
In order to clearly describe the horizontal levels I would use as potential targets for any short trades I may enter if price does break below this level, I need to zoom out on the weekly chart to see the range of price action that formed between 2015 and 2017. I have marked these levels on the chart below – 1.0900 as my first potential target, and a very distant 1.0500 as the long-term aim.
If the 1.1000 level breaks down, I will continue to look at the lower timeframes as they can offer some higher reward to risk opportunities, with the benefit of offering a more precise entry than entering on the daily timeframe.
Another currency pair I would like to briefly mention is CAD/CHF. The daily chart, shown below, is showing lower highs and lower lows in price action, and the moving averages are in alignment and showing bearish geometry. The RSI and MACD indicators are bearish and converging with price, suggesting that the trend is healthy and there may still be some momentum to the downside. Price is currently pulling back up towards a sell zone around the 10 and 20 period moving averages, and I am awaiting a small bearish candle to print in this sell zone to give a potential short opportunity on the daily timeframe.