The Aussie Dollar had a bad week then a great bounce last week. It managed to close above the important support zone in the 1.0370/1.04 region we identified.
It sits this morning comfortably atop 1.05 and more than 2 cents above the lows from last week.
Tough times for some traders no doubt and one of my systems is still short and more than 100 points out of the money and getting close to being stopped out – it is a small percentage capital position, though.
So let’s have a look at what might be going on with a few charts:
This first chart highlights the support below and the downtrend resistance from the recent high at 1.0857. The second chart is the one I’ve been using more often which also has the Bollinger Band cloud I use with the 15 day moving average:
On a combination of both these charts I’d say the Aussie has made a vey important short term base – it is nearing resistance to tell us if we have to revisit and retest to prove support or a probe to the topside is in the offing.
At present it looks like I was both right and wrong last week. Right to highlight the old resistance zone which is now acting as support, but clearly wrong and out of the money on my thoughts the low could be in the 1.02′s or even 1.01 region.
It’s a messy time but perhaps we can get a guide from other markets.
The euro is trying to break higher. Incongruous as this seems to me. This bears watching as it tells us something about the US dollar – which is the other side of the Australian dollar:
Equally the S&P 500′s performance overnight was good and while this equity rally keeps on keeping on it’s unlikely the Australian dollar bears can get the upper hand.
This is certainly the case while Fed Chairman Bernanke reiterated the commitment to low rates in the US. in order to help the economy grow faster and address the structural unemployment problem:
So, where does that leave me?
Guessing, feeling, that the momentum swing in the Australian dollar, US dollar and euro might have a little bit more room to run yet – Bernanke’s comments support this view.
So, I guess it might be time to recognize. This might just be a big old range trade. But position accordingly until the transition to the next trend, whatever that may be, becomes clearer.
Have a good day
Gregory McKenna
www.twitter.com/gregorymckenna