Technicals | Oct 17 2013
Bottom Line 16/10/13
Daily Trend: Up
Weekly Trend: Up
Monthly Trend: Down
Technical Discussion
The Aussie dollar to this point has done everything we have asked of it. And with the target zone circa 96.00 – 96.50 looming, the big questions still remains as to whether a major low has been locked into place back at 88.50, or whether this move higher is simply counter to trend, with another leg lower below 88.50 still on the cards over the coming months. Even bigger picture analytics are giving very little away. The move higher up to 110.80 off the 2008 lows that tagged 60.00, we have labelled as a Wave-(1) or (A) high. And as such the weakness seen since then is part of a Wave-(2) or (B) low trying to bottom. These moves generally travel into at least the 50.0% retracement zone which in this case sits at 85.40. And with the 38.2% more shallow option targeting 91.40, it is clear that the lows attained thus far sit right in the middle of this expected downside range. Not uncommon for Wave-(B)'s and not uncommon for Wave-(2)'s if the market in question is considered bullish. So from a bigger picture perspective, we are certainly keeping a very open mind about what could be unfolding here.
Head & Shoulders patterns I definitely like to see better symmetry attached to than what we have been presented with on our chart. The right shoulder is a little too deep and in fact could almost be regarded as a double bottom. Yet in this situation at the end of the day, both these pattern interpretations are going to have similar target projections up towards 96.00 – 96.50, with price last night tagging an intraday high of 95.50. So we are getting there. Yet last nights session has also taken price back into an overbought position with some Type-A bearish divergence also in play. So right here right now, the attempted push up into our target zone could well be laboured at best. Overall though, everything has played out to our expectations. The reverse Head & Shoulders / Double Bottom successfully triggered, 94.00 old support now a potential line of resistance created the expected hesitation, and now price is making an attempt at our initial target zone circa 96.00 – 96.50. Not saying we will get there, yet it has been a pleasing result regardless. And outside all of this, my main interest now is really whether 94.00 resistance can return to its former glory as a strong line of major support. A big ask right at this juncture though.
Trading Strategy
We have backed our analysis and are continuing to trade the AUD long from 92.30. And in between reviews we have raised the trailing stop up to 93.80 to start locking in some profits. If price can continue onwards and upwards from here, we will simply continue to trail our stop even higher. And potentially more aggressively as well as our initial targets loom and with the presence of the immediate head winds mentioned in our review tonight. I can't get longer term bullish this though until a lot higher price levels can be achieved. And the old 94.00 support line stepping up to the plate once more. So for now we will just milk this trade for everything its got, and let price lead the way and provide the answers over time in relation to what it wishes to do longer term.
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