AUDUSD—daily analysis

My short stopped at -40 pips. I then went long at .8710, took some partial profits at +60 pips and had a slight profit stop in place which was just hit on the spike down for +10 pips. The pair hit a high of .8814; the spike down was to .8714, just above yesterday's resistance level and it bounced from there.

Frankly, the markets are a little squirrely, a little directionless, which isn't unusual for summer or times of lower liquidity. It's times like these that make traders nervous—they feel they should be trading but the signals are unclear. Believe me, it's far better to stay out. You can't lose money being out of the market. Of course you can't make money either but if there's a lot of sideways movement going on then there's not a lot of profits out there anyway.

So, will the AUDUSD go up or down? Hah! I can make an argument either way. I'm not going to trade for the sake of trading and if I can't form a strong opinion or find a good entry then I will stay out.

I looked at the weekly chart yesterday and could make an argument from an Elliott Wave perspective that the pair was starting down along with the potential triple or double top. Both the triple and double top are only potentials at this point. People often forget they require confirmation. In the case of the triple top, the confirmation will be below .8066; for the double top it will be below.8316. Both of these are below the short term upward trend line on the weekly at .8460.

On the positive side, there was a confirmed double bottom with a price objective of .9040. Yet it can't seem to get past the resistance at .8860/80.

On the daily chart you can see two upward trend lines. The first one, in green, was broken in April at .9096; the second one, in blue, is currently at .8248. It's worth noting that .9096 isn't that far from the price target for the confirmed double bottom so it's possible there could be a retest of the trend line. On the other hand, a broken long-term trend line is a broken long-term trend line and shouldn't be taken lightly. Also interesting is the long-term divergence with RSI—higher prices but lower oscillator readings. This means weakness but you can go broke waiting for it as this chart shows.

I've outlined in grey a possible Gartley pattern formation. If this is true it would match the ideal if price was about.9096—hmm, where have we seen that number before? It's the price target for the confirmed double bottom.

My bias is short in this pair but there's no trade for me here yet. Let's see if price can stay above the hammer (on the hourly chart) low of .8714.

Here's the daily 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.