Technicals | Apr 19 2017
Bottom Line 18/03/17
Daily Trend: Up
Weekly Trend: Neutral
Monthly Trend: Up
Support Levels: 74.70 / 73.60 / 71.40
Resistance Levels: 77.80 / 78.40 / 80.00 / 81.60
Technical Discussion
The U.S Dollar fell to monthly lows last week with U.S retail sales dropping for the second consecutive month which is the first time this has happened in over two years. This was on the back of CPI also dropping for the first time in over 12 months. The Federal Reserve has been adamant on at least two more rate hikes in the States this year, be it the weakness within recent reporting would have FOREX traders a little on edge. Normally you would see the AUD take advantage of the Greenback's recent lack luster performance, yet it wasn't to be as Iron Ore continued to drop combined with geopolitical tensions creating a risk off environment. Lets take a look at the technicals.
Reasons to stay cautious:
→ Inflation remains in check in Australia (yet watching)
→ unemployment data being monitored
→ Further interest rate cuts still possible yet an 'on hold' approach now more likely
→ strong support zone 67.00 – 68.00 remains robust
→ Iron Ore uptrend now in question.
In Mid March we certainly had some optimism about price breaking out to the upside yet once again the overhead supply zone starting around 78.00 and extending up towards 82.00 is proving extremely difficult for price to break into let alone break out of to the upside. It has become even more of an issue now due to the number of attempts it has made without success. The longer it takes to push into this zone, the more likely price will simply give in and start to take the path of least resistance, which in this case will be down. Technically things are not all bad though. The 200 moving average is continuing to act overall supportive, and off the impulsive move north that commenced in earnest at the beginning of the year, the typical 50.0% – 61.8% pull back zone comes in at 74.40 and 73.70 respectively.
Thus far price has come up a little short of these numbers with the more immediate lows having only tagged 74.70 to this point. So even a move into the typical retracement area will continue to keep things positive, be it this optimism will clearly start to wane below 73.70, so keep a very close eye on this number. Any lower swing high pattern from here will also likely bring to the fore some Type-A bullish divergence, so combined with our Fibonacci numbers, a move towards 73.70 – 74.40 should see some buyers start to come out of the wood work. The big question though is whether they will be happy to stick to around. We remain positive, yet only whilst 73.70 continues to hold.
Trading Strategy
'No upside follow through has been forth coming to this point which is what we are going to need over the coming days if our trade is going to come up Trumps .…' Since our last review price did fail to get on with the job, and we were stopped out of our trade for a loss. We are now in the process of reassessing whether price is going to eventually break out higher, or whether the risk averse environment we are now in is going to remain in place for a number of more months rather than weeks. Stay sidelined until we can be guided better on direction over the short to medium term time frames.
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