I closed my long for +500 pips after it faltered here once again. I'm short from .8670 and .8663.
Building on what I've written about AUDUSD, the picture is looking weaker. After my earlier blog post the pair rose again, this time reaching a high of .8682 or 8 pips higher than the prior two recent highs.
Gann wrote that if a pair repeatedly touches a price it will probably break through after a few tries. This may be true but I don't expect to see momentum falter as it did on the short-term charts (lower highs in the oscillator with higher highs in price). Remember, too, I was concerned about the longer-term context with too steep an angle on the daily ascent. While the pair still has a potential price target of .9035 from the double bottom, it doesn't seem able to pull it off without gathering a little more energy. Another pullback might give it what it takes. So I won't be opposed to going long at some point.
A look at the three-hour chart shows weakness. First, if you look at the blue uptrend lines I've drawn under price and RSI you can see that it has broken below both of them. This isn't good. Second, if you look at the red lines around price, it shows narrowing price action in a wedge formation. Wedges can be consolidation formations with or against the prevailing trend. So it's inconclusive here but with other hints from the charts I find it short-term negative. Comparing the red uptrend line under price with the red downtrend line on RSI suggests negative divergence. Given these plus additional clues from the shorter-term charts, I decided that short was the better position as of now. Since I just moved my stop to breakeven on both my new shorts, I have little risk here.
We do have the support of .8582 from overnight to contend with that I blogged about earlier. As price approaches this level, I'll study price behavior and momentum and may close at least one of my short positions. However, if the pair breaks below here, the next supports are at .8551/46, .8495/88, .8426, .8400, .8364/56, .8258, .8195, .8133, .8082 and .8067.
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.