Last week when I blogged about the Aussie, it was headed down. On Friday I blogged it was targeting support at the uptrend line from June. It broke through that last night. After sinking to a low of .9821, it is currently retesting the broken line at .9883. This is also near a fibo so if the pair can scale these, then that will show some strength.
On the weekly chart (not shown), the pair could be in a C wave where .618 of A would be .9859. It didn't get that far below this. If that is true—big if when talking about Elliott Wave—the next move would be up. On the daily chart (not shown) the RSI hasn't dropped below 41.58 after six days of dropping prices. That, too, is positive. The three-hour chart shows a large bullish engulfing candle overnight. There is also positive divergence although RSI did break below its uptrend line. At .9812, price would be at .618 of the move up from .9537 to 1.0257. It got very close to that with its low of .9821. On the hourly chart, RSI has managed to move out of oversold although it's been largely basing for the last several hours. Finally, the pair is still in an overall uptrend and philosophically one would want to buy dips.
For all of those reasons I bought at .9859. Before entering a trade, the first thing I do is calculate the risk and determine how I will know I am wrong. In this case, it's relatively easy to know. If the pair closes below .9800 (and the first hint will be a dip below .9821), I'd back out and assume AUDUSD will target the next level of support at .9690, .9612 or .9544/32. Another way I'll know I'm wrong is if there are signs are serious faltering as it tries to get above the trend line. This can best detected on shorter-term charts.
Resistance is at .9982 (strong), 1.0030/56, 1.0183 and 1.0214. I think it’s doubtful it will get above there but I still have active price targets that go to 1.0307 and 1.0500 (see the January 3 blog).
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.