Technicals | Dec 02 2015
Bottom Line 01/12/15
Daily Trend: Up
Weekly Trend: Up
Monthly Trend: Down
Support Levels: 70.10 / 67.80 / 66.80 / 63.00 – 64.00
Resistance Levels: 74.40 / 76.00 / 78.50
Technical Discussion
'We are going to give price a little more rope to hang itself before we cancel out on our trade recommendations, and that will occur via any move that sticks below 70.10.' Well 70.10 has held since our last review combined with our trade recommendation triggering. The Aussie over the past 24 hours has posted some nice gains on the back of pending home sales reporting in the U.S falling well short of forecast. And today our Reserve Bank has kept interest rates on hold at a record low of 2.0 percent. The added rhetoric by Stevens was a simple lets wait and see how things progress leading up to February 2016 yet it has to be said that economic data has been good recently, including an unemployment rate falling to a 6 month low. The Aussie has traded as high as 72.84 today post announcement as experts start to ponder whether we are now at significant lows in the interest rate cycle.
Reasons to stay bearish (back to neutral above 76.00):
→ Inflation remains in check in Australia.
→ unemployment remains an issue yet recent reporting more positive
→ Interest rates for the most part at record lows. U.S continuing to flag hikes
→ support zone 67.00 – 68.00 now in play
We've been watching the potential double bottom or cup and handle pattern slowly yet surely unfold over the past couple of months. The only thing we are not overly impressed with is the right shoulder / handle which time wise and depth wise has all but lost symmetry. These patterns certainly have better outcomes when symmetry holds together yet we did draw our line in the sand at 70.10 and to this point this number has not been broken below. The trigger for both these patterns to ignite is above 73.80 with further momentum building above 74.40 . The target is quite decent at 78.60 and when these patterns do trigger, targets are generally quite reliable. So we will definitely be buoyed if the desired moves do take hold over the coming weeks. We continue to be quietly optimistic be it overall price action continues to be a bit of a grind.
Trading Strategy
After massaging our buy signal to time a more appropriate entry level, we have ended up trading long via an aggressive recommendation at 71.61 with stops below 70.10. It was an early entry as we continued to see signs that price was remaining robust above the 70c level after having double dipped below in September. The more conservative trigger is above 73.80 so for the less assertive, this would be another entry point worth considering with the target from such a move centered on 78.60 as mentioned above. We've been patient enough with this though, so lets raise the stop to just under 71.60 tonight to lock in an almost break even trade, which is always a comfortable position to be in.
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