AUDUSD—topping?

On the weekly chart, AUDUSD looks as though it may be topping and it has never regained its November high of .9406. On the other hand, the bounce up from the last uptrend line was a sharp one so clearly bullish sentiment continues for this pair. Overall, it has broken two trend lines. The third one may be significant support as a horizontal support line intersects it at .8975. If price reaches that level, a long position might be a good way to go. It will very much depend on price action on the shorter time frames.

I’m leaning, though, towards shorting this pair for a few reasons. Note on the weekly chart that RSI dropped to a low not seen since March 2009. Even with the holiday fizzle, this is dramatic. In addition, as I wrote on January 4, I believe that the .9406 top completed a primary wave two in this pair and that we’re beginning the third wave down. What a ride that will be if it’s true. Honestly, I don’t wish that on anyone who just went long but why would you be going long at this level? The other reason is that gently rounding top that you see on the weekly top—it’s as though interest is just slowly drying up. There are rumors, too, that commodity prices may be easing so this pair, being a commodity currency, would also ease back.

A definitive close below yesterday’s low of .9171 may be the time to short since I didn’t short at Monday’s high.

Here’s the weekly chart:


© Dianne Fecteau, 2010. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.

My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.