Originally published by Guppytraders.com
The Australian dollar breakout stalled near US$0.80. In the longer term the width of the trading band can be projected upwards to set a target near US$0.835. The current consolidation behaviour suggests that US$0.835 remains a valid target.
There is no question that the Aussie strength is a direct consequence of weakness in the US dollar which has plunged below $0.93 on the dollar index chart. Although the strength of the Australian dollar may be driven by the weakness of the US dollar it’s the behaviour of the Australian dollar that sets the breakout targets.
The long term trading band is the most significant feature on the Australian dollar chart. The upper edge of the trading band near US$0.775 was established in 2016 April. The lower edge of the trading band near US$0.715 was first tested in 2016 June.
The breakout above US$0.775 in July was significant because it was the first strong move in 18 months. A breakout above this level can move rapidly to the next resistance feature but after the initial rally, the breakout has slowed. This suggests a more sustainable and stronger uptrend behavior. .
The width of the trading band is projected upwards to set a target near US$0.835. This is a very reliable price projection method when applied to equity and commodity markets. In FX markets this target calculation is treated with some caution and used as a guide only .
We use Guppy Multiple Moving Averages indicator analysis to identify trend strength and trend changes. In these situations it is a powerful analysis tool. Trend confirmation comes when the short term GMMA moves above the upper edge of the trading band. This has developed and it is key confirmation the Australian dollar has moved into a trending can apply longer term trading methods to capture the trend behavior. We use the ANTSSYS trade and analysis method to identify the opportunities as the trend develops. A sustained break above US$0.80. is a signal for trend continuation towards US$0.835.
Daryl Guppy is a leading international financial technical analysis expert and special consultant to Axicorp. Guppy appears regularly on CNBC Asia and is known as "The Chart Man". Disclaimer: Daryl Guppy is not a financial advisor. These notes are for educational purposes only and provide an example of applied technical analysis.