Chart Of The Day: Australian Dollar May Have (Finally) Hit Bottom
Investing.com | Feb 18, 2020 13:00
The Australian dollar has been slipping fairly steadily since the Reserve Bank of Australia opted two weeks ago not to raise interest rates. The central bank's rationale: to avoid spurring additional borrowing even as local house prices rise and fears of a bubble escalate.
Get The App
Get The App
The most recent slide for the struggling Aussie continued today, for a fourth day. However, the supply / demand tug-of-war is producing a pattern that's consistent with a bottom.
Get The App
Get The App
Get The App
Get The App
While the AUD/USD has been slumping for the fourth consecutive day, the pair is finding support precisely at the level where the lows occurred during the last trading day of January and the first trading day of February. The Feb. 7 low, however, was lower, suggesting a H&S bottom.
Get The App
The market mechanics of the formation—with its lower lows from the left shoulder and the head—signals that bears are confident of their control. However, when the right shoulder fails to keep that downtrend consistent, traders begin to notice.
Get The App
Note, also, that even the falling troughs between the left shoulder and the head were congested, leaving one of two options: either supply is not eager, or demand is picking up whatever supply is being provided. Or both. Either way, bulls are starting to change the conversation.
Get The App
Note, the RSI has been developing a H&S bottom of its own, demonstrating momentum is consistent with the price’s potential reversal. The MACD also provided a buy signal, but only when the shorter MA crossed above the longer MA.
Get The App
The 50 DMA climbed until it reached the 200 DMA and has been moving along right beneath it. An upside breakout of the price pattern would pull the 50 DMA above the 200 DMA, triggering a golden cross.
Get The App
Conservative traders should wait for an upside breakout, including a close above the 200 DMA, then wait for a return move that would successfully test the support of the H&S neckline, for a long position.
Get The App
Moderate traders would wait for a close above 0.6800, the round number above the highest post of the pattern. Then, they’d wait for a pullback for a better entry for a long position, not necessarily for confirmation of trend.
Get The App
Aggressive traders may risk a long position now, before the price takes on the neckline, which for now remains a resistance.
Get The App
- Entry: 0.6680
- Stop-Loss: 0.6670, below the day’s low
- Risk: 10 pips
- Target: 0.6710
- Reward: 30 pips
- Risk:Reward Ratio: 1:3
Get The App
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.