Technicals | Mar 25 2015
Bottom Line 24/03/15
Daily Trend: Up
Weekly Trend: Down
Monthly Trend: Down
Support Levels: 76.20 / 70.00 / 67.80
Resistance Levels: 79.00 – 80.00 / 83.70 / 86.60
Technical Discussion
The Australian Dollar has found some support at long last, yet from where it presently sits, it is right in an area where we would expect it to inflect from. Our currency has gained around 3.7% in the last week against the Greenback which is certainly its best performance for some time, yet there is certainly reason to continue to remain cautious. That said, interest rate hikes in the U.S appear to have been factored in, yet they may now not occur as quickly as expected. So this could add some further strength to the Aussie, especially as the Fed has signaled it has become increasingly uneasy with the rapid appreciation of the U.S Dollar. Comments that could well see bullish traders start to wind back some positions after what’s been a stellar performance. So all of this has the potential to put a floor under our currency, with any move back above 80.00 switching our stance from bearish to neutral if it proves it can stick over the longer term.
Reasons to be bearish (back to neutral above 79.00 – 80.00):
? Inflation remains in check in Australia with unemployment an issue
? Interest rates for the most part at record lows. U.S recently flagging hikes
? recent rate cut in February puts a second in the spotlight for April
? higher degree 61.8% retracement still in play
First things first, the bears are still dominating here overall. The consolidation below the old zone of strong support now acting as resistance is generally considered bearish and conducive to further moves to the downside. Yet on the flip side, we do have massive respect for the 79.00 – 80.00 price zone. Whether it was when it was acting as a multi year support area, or now when it is acting as overhead resistance. So if price were to break up from here and back above 80.00 and stick above it, then immediately we will be reverting from a bearish to a more neutral stance which is a step in the right direction. There is no divergence in play and even though price is heading back into overbought territory, there is scope for it to knock on the door of the overhead supply area and start asking some questions. For now its certainly an inflection point and a strong barrier for higher levels being attained shorter term, so we continue to proceed with caution. At least until more evidence can be provided that a major low point has finally been able to lock into place. Â
Trading Strategy
The potential for a complex reverse head and shoulders bottom pattern to evolve over the coming weeks is certainly possible which could provide a bullish trading opportunity against the trend. The pattern would have two heads which defines the ‘complex’ status we would be placing on it. If we were to get involved though, we would ideally like to see price continue to push on higher to 83.00, then sit back and consolidate above 80.00, then swing higher again above 83.00 and the proposed neckline trigger. Great patterns with high probability outcomes which in this case would potentially see a strong move back up towards 90.00 as part of the patterns target. Plenty of work still to do for even the pattern to develop, so best not get too far ahead of ourselves. Stand aside for now.
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