Technicals | Mar 02 2022
Bottom Line 01/03/22
Daily Trend: Up
Weekly Trend: Up
Monthly Trend: Down
Support Levels: 69.18 / 68.04
Resistance Levels: 72.51 / 74.99 / 75.66
Note: The Chart above is not of the spot AUDUSD per se but of a proxy ETF traded on the Philadelphia Currency Exchange which allows access for the smaller player. In the US.
Technical Discussion
Reasons to be neutral:
→ the bounce off the throw-over lows circa 57.49 back in March 2020 has been solid
→ impulsive price action north had bullish intent locking in a high in February 2021 circa 79.55
→ so the multi-year downtrend since 2011 appears to have drawn to a close
→ Australian Dollar will thrive if a ‘risk on’ global environment can sustain
Price has now traveled almost to the tick into the 50.0% retracement zone circa 69.00. The recent fakeout to the downside on the 28th of January tagged 69.18, with the reaction the next day solid enough to lock in an island reversal. We generally view these patterns as short-term positive yet not significant enough to define themselves as trend reversal catalysts.
On the flip side, a double bottom trigger from here above 72.51 does have the potential to take price towards overhead resistance circa the 75.50 price zone. An area that we would be expecting price to inflect from, at least initially. With a break past here potentially then signaling that we have a change of trend on our hands.
The double bottom trigger if it can stick should also see enough upside momentum come into play to push price past the 200 day MA acting as dynamic resistance. If this occurs it will be the first time price has achieved this since mid-2021. What we would also like to see as part of such a move is price action reverting from being corrective in nature to impulsive.
As you can see on our chart, the base range since December has been overall choppy and overlapping in nature. And even though this price rotation looks to be building energy, post-breakout we really need to see it revert to having motive if we are to have confidence that the breakout move is going to stick. We will continue to monitor.
Trading Strategy
Based on our review tonight we are going to offer up a recommendation on the long side aligned to the double bottom trigger. It will be crucial that the breakout doesn’t prove to be a fakeout, yet as always we will just need to deal with such a scenario if and when it occurs. So the recommendation is to trade long at 72.52 with the initial stop placed at 70.49. We will manage the position using a trailing stop.
The Chartist cautions: The Invesco CurrencyShares Australian Dollar ETF (FXA) does have a tendency to gap around. So more recommended for experienced traders.
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