Technicals | Aug 23 2018
Bottom Line 22/08/18
Daily Trend: Up
Weekly Trend: Down
Monthly Trend: Down
Support Levels: 71.50 / 68.20
Resistance Levels: 74.84 / 76.76 / 78.12 / 79.88
Technical Discussion
The Australian Dollar has continued to lock in some gains off the recent 72.00 lows, yet we are still 100 miles away from being able to confirm if some form of major low has finally locked into place. Especially as the recent gains may simply be due to Trump trying to jaw bone down the Greenback. He has recently been critical of the U.SÂ Federal Reserve and in recent interviews has stated very clearly that he does not agree with the way the Fed has been raising rates since February. Basis this we have also seen some solid gains in currencies like the Euro and Great Britain Pound over the past week or so, yet like the Aussie, a trend reversal is far from being confirmed just yet. Watch out for the minutes from the FOMC meeting that are being released this week [last night].
Reasons for caution (officially bullish only above 81.60 resistance):
? Inflation remains in check in Australia yet being monitored quarterlyÂ
? unemployment data being monitored / wages growth still weak
? Lowering interest rate cycle appears to have run its course ?
? strong support zone 60.00 – 70.00 remains robust
Our eyes have been purely focused on the bearish lowering channel that has been dominating the chart since the beginning of 2018. The move has been relentless to the downside off the 81.35 highs down to the recent 72.00 price point. Yet over the past five trading sessions price has reversed quite strongly and is presently making a play back on the 74.00 price zone which is where demand has resided in the past. Yet since price dropped below here, we now need to observe whether it has reverted into an area of supply rather than demand.
Price has made its way back into the bearish triangle pattern post it attaining pattern target at 72.00, so now it is a matter of seeing whether a 1st stage break out move can be achieved above 74.84. We like that the bounce has been impulsive and strong rather than corrective and weak, yet we need some milestones to be achieved before we can start making any assumptions that a major reversal is now in play. The first milestone as mentioned will be above 74.84, with second coming into play above 76.76. Our daily divergence indicator is presently bouncing off an oversold position, and our weekly has some Type-A bullish divergence in play that has yet to trigger. So this is clearly a positive in regards to this upside move potentially having some substance attached to it. Early days yet it’s back on our radar.Â
Trading Strategy
No long positions will be considered until 74.84 can be broken above with conviction, and even then such a trade would be considered somewhat aggressive. Bigger picture as we keep mentioning it is the move above 81.60 that is the potential game changer as it finally takes price out of the sideways grind it has been in for the past couple of years. The big question now is whether the two year upward grind from 2016 – 2018 has now cleaned itself out enough via the recent tagging of 72.00. Entering trades right here may prove profitable yet it is certainly very high risk. On the flip side if price can make its way back to 74.84, have a breather, then swing higher again from there, then this will be the type of trade that we will be putting up for consideration. Hands off the trigger til then.Â
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