The commodity linked Australian currency is now relatively neutral and this pair will find its direction based on the USD, however, be aware that Chinese data does have an affect on the Australian economy (due to their reliance on Chinese demand for export ) and therefore on the strength of AUD. Saturday their cpi came out unfavourably and this is not yet reflected in the current price action. Also, Monday morning the NAB business confidence (a leading indicator of economic health) will come out which may help to give this pair a clear direction the for week to come.
On the technical side, price has been contained by the intersection of a 210 pip wide and a 115 pip wide on the hourly timeframe for most of last week. It tested the upper and lower of both these channels without choosing one over the other. Zooming out a bit we can see price trading smack in the middle of a symmetrical triangle and edging closer to the apex, indicating a breakout is due. A breakout to either side will determine the channel the pair is likely to stick to in the coming days. Finally we have a pattern spanning both channels and completing on the lower line of the one.
With so much going on my approach is to be patient, observe and choose my trade based on if… then… reasoning.
In summary, the following things could happen:
- Price moves up and breaks to the upside of the symmetrical triangle. In doing so, it chooses the and I would expect price to gradually move to the upper channel line. I would go long after a break above and close above the triangle. There are 155 pips to be made in this scenario.
- Price moves up but reverses at the upper of the . This would be a classic example of sell the high and I would go short, with TP1 the lower triangle line and TP2 the lower channel line. There are 125 pips to be made in this scenario.
- Price moves down and breaks to the downside of the triangle. In doing so, it chooses the and I would expect price to gradually move to the lower channel line. I would go short after a break below and close below the triangle. There are 60 pips to be made in this scenario.
- For the last two scenarios there would be a potential follow up. Once price has reached the lower channel line, it will have completed a . I would go long at the completion point and exit at the upper channel line. There are 100 pips to be made in this scenario.
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