Originally published by Guppytraders.com
The Australian dollar challenged the long term resistance level near 81 and then failed to develop a new uptrend. The retreat took the Australian dollar back to test the long term support level near 7.75. Australian exemption from the new US steel tariffs has caused a new jump in the dollar. Will the Australian dollar be able to break above the old long term resistance level near 81.
A breakout above the upper edge of a long term trading band has the potential to test 84.5.
The situation is a little more bullish than it was in 2018 January when the Australian dollar last tested 81 resistance. These bullish features include a successful test and rebound from the support level near 77.5. The bullish features include a continuation of the uptrend behaviour supported by the long term Guppy Multiple Moving Average (GMMA) indicators. The bullish features include the placement of a new uptrend line starting from the low near 71 in 2016 December.
The breakout target near 84.5 is a technical target based on the trading band projection. This level has no previous history of support or resistance so this leaves open the potential for the Australian dollar to move above this technical target.
The long trading band at the 77.5 level was established in 2016 April and tested many times as a resistance level. This increases its importance as a support level when the Australian dollar moved above 77.5 to the new resistance level near 81.
The resistance level is had its third test in six months in 2018 January before a retreat developed. The new rally will retest 81 as a resistance level. The frequent previous tests increases the probability that the Aussie can break above resistance. A breakout above this level has a significant impact on Australian interest rates with the Australian Reserve bank even more reluctant to increase interest rates when the dollar is strong.
The width of the trading band between 78.5 and 81 is projected upwards to set a target near 84.5. This target is treated with caution and used as a guide only because these price projection methods are not quite as reliable as they are with index and equity charts..
We use Guppy Multiple Moving Averages indicator analysis to identify trend strength and trend changes. Full trend confirmation comes when the short term GMMA moves completely above the upper edge of the trading band. This is the key indicator and we use the ANTSSYS trade and analysis method to identify the opportunities as the rally continues.
The longer term outlook for the Australian dollar remains bullish.
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.