AUDUSD—weekly

The most noticeable characteristic on the weekly chart, besides the robust uptrend, is the doji candle that formed this past week. This candle is a dragonfly doji. In the dragonfly, the open and close takes place at or very near the high. In this case, the high for the week was 1.0581 (almost spot on the high of the prior week at 1.0583 that was the open for the week) and the close was 1.0566. The low for the week was 1.0390. Many see this type candle as bullish because psychologically it shows that price dropped to lower lows but managed to close near the highs. Nonetheless, it reinforces resistance at 1.0583.

Any type of doji, after up trend, hints that the market may be running out of steam. This doji, coming as it does at a new high, is suspicious. If this week's price action results in the Aussie closing at lower lows, then it will confirm an evening star pattern which. This is bearish.

Still, bearishness may only mean a correction before the uptrend resumes. After 1.0390, there is strong support in a price zone from 1.0289/82 (week ending 4/8 low and weekly 10 EMA) down to 1.0248 (.382 of the 9704/10583 move) and 1.0205. With such a strong uptrend in place, this zone most likely would hold any correction.

I'm still long with various positions from .9940. I would probably add on significant dips. It is true that this trend is mature and it is true there is negative divergence on the weekly chart. However, unless we're going to have a significant correction across many markets and unless there is going to be some sort of policy change that supports the US dollar (haha, let me not choke laughing), it's more likely the Aussie will resume an uptrend after any correction. If it does so, 106.50 is next and there are price targets up to 114. Of course much backing and filling would occur along the way.

Here's the weekly 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.