Technicals | Nov 27 2013
Bottom Line 26/11/13
Daily Trend: Down
Weekly Trend: Down
Monthly Trend: Down
Technical Discussion
The Aussie Dollar has yet again taken a turn for the worse. Even a 5th month of negative home sales figures released in the U.S last night did little to stimulate our currency, even though the U.S dollar slumped against the other majors on the announcement. Last night's session dropped from 91.90 down to 91.20 before closing at 91.40. Although it is worth noting that as of writing, price has now made its way back up towards last night's highs once more. There are two main areas at the moment that are guiding our currencies short to medium trajectory. And that is the whens, whats and hows related to stimulus tapering in the U.S, and of course our own RBA's rhetoric and actions in relation to our own interest rates. Obviously further easing or hints of further easing means the AUD will remain under pressure. The next official cash rate announcement is on the 3rd December. No doubt it will be a market mover in itself.
Our successful trade was triggered basis the reverse head & shoulders pattern which had a target up towards 96.50. Once this was achieved we tightened our stops right up and the rest is now history. Price ended up stretching a little higher up towards 97.50, yet then clearly rejected from there. And its been nothing but down hill since. The a-b-c run lower to 92.80 was nice and symmetrical, taking price into an over sold position and also tagging the 50.0% retracement zone circa 93.00. From here we took another aggressive trade be it low risk, yet price soon revealed it was far from ready to start making any head way north again. And in fact is now looking decidedly weak once more. The 61.8% pull back area projected 91.90 yet price has even pushed below this now as of last nights session. With the low tagged thus far being 91.20. It is still possible we have a Wave-2 or B in place right here, especially as these waves can also retrace as far 78.6% and still be considered typical.
Yet from our experience, once price progresses further beyond 61.8%, we need to be on alert that all may not be well. And this is the stance we now have with the Australian Dollar. We have some weak Type-A bullish divergence in place right here yet it is almost verging on the less than powerful Type-C divergence which means price has swung lower with the indicator tagging a double bottom. Which is almost the case as seen on our chart tonight. Lets put it this way. Any drop now below 91.20, and almost certainly we head back towards 88.50 for a double bottom scenario. Potentially bullish if buyers come piling back in. Yet any break here below and we are back focusing on the higher degree 50.0% retracement point at 85.40. Which is the typical pullback of the run up off the 2008 lows circa 60.00. With the larger 61.8% retracement even lower down toward just under 80.00. It needs to be noted that any of these numbers still has the AUD postioned bullish longer term. And by that we mean over the coming years. Over the coming weeks & months though, things are going to remain clouded whilst a major low point continues to be sought.
Trading Strategy
Since our last review we closed out of a successful long trade entering at 92.30 and exiting at 95.20 in line with our analysis. Yet we also took on a small loss post that entering at 93.81 and being stopped out at 92.79 as price clearly proved it could not hold the minor support line circa 92.80. The only course of action here is to now stay sidelined. As we explained in our review, any drop below last night's low that sticks means that a double bottom back towards 88.50 suddenly becomes a best case scenario. Yet as we've noted as part of our ongoing reviews, there are some typical targets yet to be achieved below this area as well. So this overall longer term weakness, may still have more to come just yet.
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