AUD technical update.

July 27, 2011

FOREX

I posted this earlier today at Macrobusiness. It has a trading and technical analysis bias but scarily it looks like the AUD is biased higher if we can get to the end of the week above the recent high of 1.1013. Here is the full piece.

The Aussie has broken the major resistance level and this year’s high at 1.1013 today in the wake then the higher than expected CPI.

While it hasn’t really gone on with it yet this break, if sustained, is important in the overall context of where the Aussie might be headed.

Look at the long term chart above. I can’t get the level right on the low which is throwing out the very important 61.8% retracement slighthly but we identified this as 1.1014 back in May 2011 as key resistance. The Aussie has traded through here today so in pure Fibonacci terms it is biased higher if it can stay above here this week, month end, and into next month. The technical target, this is a target not a forecast, using pure Fibonacci levels is for a full retracement of the downmove from 1971 to 2001 – 1.4870!

Remember, this is just a look at the charts and there is a lot of wood to chop first, but this type of analysis had me waiting for 3 years swap rates to trade down to 4.60% for many months before it happened during the past few weeks. But remember the time frame here – above is a monthly chart over 40 years. It is not a trade.

More relevant for the time frame in which we exist are the daily and hourly charts:

As I wrote last week, I was small long on the break of the recent range high and that long continues. Todays move to/through 1.1037 satisfies the outer limits of my expectations with a 1.618 move of the range. So, in the short term, I would bring my stop up to 1.0989. This would give me around 210 pts if I get stopped out but still give me room to the topside if the Aussie gets a wriggle on.

When I look at the dailies however all I see is upside. I see a currency that has been in a solid uptrend for over a year now and which recently and comprehensively rebutted the downside. The break of this year’s highs on the Fibo projection suggests a move to 1.1511 as the 1.382 projection of the .9706 – 1.1012 move earlier this year. On the way there is and will be lots of resistance with 1.1233 a big level from the original move from June to October last year. There are lots of other levels on the way as well but pullbacks in the current environment look to me, on the charts, as though they will be well supported.

Today’s break would have induced a separate, small, turtle long with a stop at 1.0812.

Interesting times for the Aussie. It is in uncharted territory in the post float era – at times like these technicals are my guide. These, and the fundamentals of why people are buying Aussie, still point to further advances.

released on October 26th.

greg@lighthousesecurities.com.au

www.twitter.com/gregorymckenna

This blog is for information only and does not constitute advice. Neither Greg McKenna nor Lighthouse Securities has taken your personal circumstances, objectives or financial situation into account. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.

If you do need economic, investment or financial advice we are happy to help.

Please Email the team at Lighthouse at info@lighthousesecurities.com.au or Greg directly on greg@lighthousesecurities.com.au

, , , , , ,

Subscribe

Subscribe to our RSS feed and social profiles to receive updates.

No comments yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: