Australian Dollar “fails” at resistance

January 18, 2012

FOREX

Overnight I tweeted that the Australian Dollar was breaking its downtrend from the highs of last year around 1.1075/80 but it was unable to hold above the crucial 1.0420/30 region and fell back this morning to around 1.0370/80.

This zone holds both the downtrend resistance from the high last year but also the 61.8% retracement of the run from 1.1075 down to 0.9388. You can see on the chart, although i haven’t drawn it, that the Aussie is forming a pretty strong pennant formation/wedge to the right which will demand resolution very soon. Obviously we need to look at a bit more price action over the days ahead but it looks to me like the Aussie needs to clear 1.0430 and close above at a New York end of day or the bias is lower.

First signs of a deeper move are if the 20 day moving average gives way at 1.0242.

Longer term however you can see in the above chart that the Aussie is struggling to break and hold above the uptrend that has been in place since early 2009. Certainly its trying but it hasn’t succeeded yet.

What’s it all mean?

I pointed out why the Aussie is doing so well at the moment earlier this week and that isn’t changing in a hurry. But technical resistance is strong in this zone as, I’m told, is fundamental support a few cents below where we are now. It all sets up for a range trading environment over the next few months I think.

Tin hat on, stops at the ready.

www.twitter.com/gregorymckenna

Please remember these are not recommendations for you to trade these are my views and I have my risk management tools and risk parameters that you do not have access to. Thus, 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.

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2 Comments on “Australian Dollar “fails” at resistance”

  1. urban daydreams (@ontheturps) Says:

    Lack of stop action above that 200 day MA seesm to suggest that the market is happy to play it short in the range you suggested?

    Reply

    • lighthousesecurities Says:

      Yep…market went searching for stops and they werent there – two things that suggests.
      1) Not too many shorts in the market – no surpruise given price action in markets and ebullience obver the past month and
      2) If that is the case then it really does need to push higher to avoid an unwinding of longs at some point

      Reply

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