While Aussie has been correcting since the early January high of 1.0256, the pair has managed to close above parity in all but two of the last thirteen trading days. On those two, one was three pips below; the other was seven.
The daily chart below shows an upward channel beginning at the end of November. I bought on Tuesday at the intersection of two uptrend lines (.9963), one from July and one from November. I added to my position this morning on a slight dip to 1.0030.
Ideally the pair would stay above .9980 (trend line and near the .382 retracement of the move down from 1.0257) and the recent low at .9944. Below .9804 would be bearish as it would confirm a double top (the 1.0257 and 1.0200 highs). Below .9538 would confirm a triple top or head and shoulders pattern with a cool target of .8819.
However, the pair is in a triangle on the daily chart and the low of .9944 was a fifth touch (point E). Symmetrical triangles are often continuation patterns. From the EW perspective, they resolve in the direction from which they were entered. In the case of the Aussie this is upward. Also, the pair is still in a long-term uptrend. So buying is the higher probability trade on the daily chart. Still, it needs to settle above 1.0257 to be really bullish.
Here's the chart:
© Dianne Fecteau, 2011. 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.