AUDUSD—monthly

A look at the monthly chart shows that AUDUSD printed a higher high and higher low than last month. So the uptrend seems intact. However, note the candle for the month (and it's doubtful it will change much today). It's known as a spinning top with its small body and is a clue that the prior uptrend may be losing steam. No surprise there, right? The pair has had a steep upward climb and it's doubtful it can continue without at least a period of consolidation. I've placed arrows over other spinning tops on the ten-year, monthly chart below. It doesn't mean a steep decline but they do tend to show a slowing down in price increases. The spinning top could become part of another formation, i.e. an evening star but we'll have to wait for November to see this.

On the monthly chart, one also sees negative divergence with RSI. Divergence has been frequent on many charts and it's never a signal in and of itself. This divergence has been taking place since the lows of 2008 so how credible is it? More important to me recently has been that RSI hasn't dropped to bearish levels, even during the May and June dips. Until it does this, I consider the overall uptrend intact.

The daily chart (not shown) shows a corrective pattern taking place as do shorter-term charts. I'd expect to see some sort of correction down to .9542/9406 so I'm looking to short this pair in the short term. If the pair falls below .9406, I'd believe that a major high was in and that there would be additional moves down as it completed a larger ABC correction on the monthly chart. But it's too early to be thinking about that now.

Here's the monthly 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.

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