Aussie's weekly chart hints at trouble ahead if the pair can't settle above the 1.0257 December high.
The first hint is the potential head and shoulder formation or potential double (actually now triple) top of 1.0183, 1.0257, and 1.0200. Neither of these will be confirmed until price falls below .9537.
The second warning are the two bearish engulfing candles that have happened at each of the previous tops.
The third problem is the bearish divergence with RSI.
There are three clustered price targets for the pair that I wrote about last week between 1.0307 and 1.0378 from the January double bottom, the daily triangle and the daily bull flag. In addition, the pair is in an overall uptrend as one can see by the two uptrend lines coming in from late 2008 and early 2009. But there is quite a bit of room between here and either of those lines so the pair could stay in a longer term uptrend while paying off quite handsomely in the short term. However, just as the upside requires a break above 1.0257, the downside requires a break below .9804 to turn traders bearish. If price reaches .9804, there are sure to be buyers coming in which is what would make it such a critical price. Bottom line, here, is it's basically a wait and see situation. I was stopped out of a long this morning and established a short position but we'll have to see how it shakes out.
elling would likely take place with the potential to push price down further to .9690, .9612 and .9544/32. However, there'd also be buyers coming at .9804 so it would likely be quite a battle. There are also the two occurrences of bearish candle formations on the weekly chart to keep an eye on. Nevertheless, so far, at least this week, the bulls are firmly in control.
Here's the weekly chart (my trades don't show on the weekly chart as I use a different package for long-term charting):
© 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.