AUDUSD—weak momentum

Well, obviously I'm out of AUDUSD since it hit my breakeven stop yesterday afternoon in its climb to .9026 and I didn't get back in. It then went on to a low of .8879 so it would have been a nice trade. Some just get away.

The pair has since bounced to .8947 where it's writhing in indecision. It may scuttle on back to .9020/26 before it drops further. Shorting rallies is not a bad way to go. However one has to be cautious and consider the overall picture.

On Monday, I wrote that last Friday's daily candle was a doji (after a climb it's known as a hanging man) with a high of .8914 and a low of .8785. Notice, that with current decline, it dropped into that price range (.8879) but is currently at .8920 (10:24 EST). If it closes above .8914, then the weekly close will be higher than last week's close. This cannot be disregarded. So far, this week's high has been .9036 and I don't think it will be taken out today. Last week's high was .8921 so at the moment it's sitting on support. What it does from here will be very interesting indeed.

The pair isn't really trending at the moment. Another thing to think about is RSI compared to price. On the three-hour chart it's bearish because RSI has dropped more than price so what's to keep this pair climbing? This is not obvious if you just draw trend lines but if you look at where RSI was the last time it was in this price range, it shows that momentum is falling off. I've blue lined the levels on the three-hour chart.

Support is at .8879, .8814/47, .8785, and .8518. Here's the three-hour 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.