The Aussie steamrolled over a potential counter-trend idea and marched on to loftier levels, which are now challenging significant technical patterns. In addition to predictive analysis and forecasting data calling for a reversal within the potential reversal zone (PRZ) range defined by technical data alone, a fundamental element is likely to come into play in that vicinity as well.
First, let's define some of the points in the charts:
1 - pattern, defined by its unusual Zero-X-A-B-C points, where Point-C remains pending
- is expected to complete at C = 0.96501
- is a pre-pattern (pattern precursor) to its Pattern acolyte
2 - A bifid Head & Shoulder, defined by two distinct shoulders and necklines
- First set of shoulders (S1) project a symmetry (h1) at 0.96436
- Second set of shoulders (S2) project a symmetry (h2) at 0.95003
3 - A pattern aiming at a return to its Point-D, which remains HIGHLY speculative
- The pattern is a finding of Scott Carney, worth studying on his http://www.harmonictrading.com site
- While a can complete at 0.886 x 0A or 1.131 x 0A, expect a minimum retracement of 50%, hence defining the five-zero of the pattern.
PREDICTIVE ANALYSIS & FORECATING DATA:
A retracement to a supportive 0.92682/0.93013 range is anticipated from the recent impulse. A break and close below 0.92266 should concern vested bulls. Otherwise, directional bias remains and sees a probable continuation into the PRZ defined above, favoring TG-1 = 0.96121 as a probable target.
RBA opted last month to keep rate unchanged, although noting that a recent rallying of the currency might temporarily impact the anticipated economic recovery. Indeed, recent improvements in core economic data has pushed the pair of this export-dependent continent to increasingly higher levels. So, expect the RBA to provide verbal hints that could help counter the current appreciation of the Aussie. However, before any verbal intervention turned into action, several months are likely to go, as long as the rate remains distanced from the 0.9500 water mark.
With all of its pattern tools out of the box, is coming out screaming and banging at price, as it nears a narrowly-defined PRZ. A layered analysis/forecasting with my own prop system falls within this narrow PRZ, so there is little left for loftier delusions at this point.
Also, Stevens of RBA let the pair rise against a non-intervention stance, risking a near-term squeeze to higher AUD levels. But now that the positive domestic data is getting absorbed, a little RBA jawboning might suffice to keep bulls at bay. I expect this to occur within the range defined by the technical data above.
Directional bias is LONG, but I will keep the indicator at "NEUTRAL" to emphasize a nearing of significant technical levels. It will take an early market reversal sign, then a market reversal signal to change it to SHORT. That will take a bit of time.
Predictive Analysis and Forecasting
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- Sunday, 13 APR 2014 - Added commentary:
The question at hand here is whether the chart is reversing or not, and if so, at what level would this presumed reversal happen.
I won't add any more technical data to what I have posted before, but I want to emphasize that sometimes, looking at the chart of the currency pair may in fact blind us to other more ubiquitous elements that may contribute to such thing as a reversal, even when the chart itself remains mute of any such approaching possibility.
What I mean here is that the trader should not limit himself to the chart alone. In the mindset that all markets are inter-connected, on has to consider that intermarket analysis does not have to be an injurious enterprise, however fancy it might sound.
In the case of the $AUDUSD, one has to be aware of the following (and this are very dumbed-down, hyper-simplified examples):
1 - AUDUSD's sovereign economy is dependent on:
a - Gold production and export: A new and significant discovery of gold is likely to decrease AUD is it would make this rare metal "a bit rarer"
b - The import capability and consumer demand of AUD's products: Any decline in China's economy would impact AUD negatively
c - Export cost: Increase in oil will increase both production and transportation, because it costs to run manufacture of goods (and gold exploration/extraction)
2 - AUDUSD rate will depend on:
a - Its central bank (RBA) rate which is based mainly on its 2-3% inflation mandate, and employment at a lesser level. Too good an economy will increase employment, which would increase demand for more good, and drive price higher (inflation). In this case, a containment of consumer demand is done by making loans more expensive by increasing the base interest rate. Conversely, if the consumers are too sluggish, decreasing the cost of borrowing will make it a bit less painful for consumers to borrow for the things they would otherwise decided not to purchase against a loan.
b - Its relative percentage relative to the USD (currently near ZERO). If the USD's central bank rate is lower than that of the RBA, investors will sell the USD against another currency. Here, an investor would look at AUDUSD and buy AUD, which is the same as selling USD. Of late, the Fed (US central bank) is expected to increase the interest rate from its near-zero baseline. Expect a rise in the USD, as investors would start selling USD crosses where the cross-currency has a lesser central-bank defined rate.
3 - AUDUSD rate depends on correlations in the value of other assets, especially:
a - XAUUSD: here, a positive news in gold would bring XAUUSD up. This would mean that the financial market would sell the USD dollar. A selling wave of the USD will ripple across the markets (inter-market analysis is getting cool or what?), and one should expect AUDUSD's own USD to sell as well, thus pushing the AUDUSD up.
b - Forex pairs correlation, such as USDCAD: A Bullish CAD news (increase in rate, improved export especially in oil to the US, or a positive news in Gold, since it's also a major producer and exported of the precious metal) would cause investors to buy CAD. Because the pair is countered by USD, this would cause investors to sell USD, this pushing AUDUSD to rise as well.
I hope this gives the junior trader a bit of an insight when trading Forex. Just as in medicine, where the total physiology of the body will cause one disease to manifest itself in various parts of the person (hence the reference of syndromes), the Forex market is only one organ intimately connected to bonds, stocks, central bank decisions and geopolitical events.
Instead of rowing your dingo boat in the world-wide ocean, wouldn't it be nice to know where the prevailing winds are, and where the currents come from? Otherwise, what's the points of even rowing if you do not even know where you are, where you go, and what you are even rowing against.
In such a litigious society where responsibility has become a hot potato left for others to assume, a few clarifying words are worth reminding the junior traders that:
1 - The act out of their own responsibilities and understanding;
2 - Trading is an exciting learning venture for those who survive the lessons;
3 - The field of trading is littered with financially bloodied up, ego bruised traders climbing Hamburger Hill from a tactically disadvantaged position, specifically because of the way institutional traders have leveled the trading fields.
In particular, I thought this sentence was protecting all the users against any litigations: "Under no circumstances shall we be liable for any loss or damage you or anyone else incurs as a result of any trading or investment activity that you or anyone else engages in based on any information or material you receive through TradingView or our Services." But, I'm afraid, this seems to be protecting only the owners of tv, not the community members...
A cautionary word, regardless of the disclaimer that cloaks the original site, offers a good measure of awareness when the words travel outside their original nest.