The AUDUSD has been smashed the last couple of days. It has even busted through a well known support level. Many bulls would have stopped out of long positions on this move down while many bears would have shorted the break. I believe this to be a classic market deception. Let’s investigate starting with the daily chart.

DAILY CHART

I have drawn a horizontal line at the support level stemming from the May 2014 low of 92.03c. A lot of chartists are focusing on this support however to sell the break of this level seems too obvious. I believe it is a fake out. A false break which should see price reverse fairly quickly and charge back up.

There may well be a 5 point broadening top playing out. I have drawn the numbers 1,2,3,4 and 5?. I suspect this move lower today is setting up point 4 with one final surge into high at 5?. Where will the final point 5 be?

As I have outlined in previous reports, I am looking for the rally to end around the 88.6% retracement level of the downleg from the October 2013 to January 2014 low. This level stands at 96.31c.

Let’s now look at the monthly chart.

MONTHLY CHART

I have added a Moving Average Convergence Divergence (MACD) indicator which is trending up with the blue line above the red line indicating a bias should be given to higher prices. However, it is in weak territory consistent with bear market rallies.

I have added a Stochastic indicator which is also trending up albeit a bearish crossover does look to be in the midst.

Finally, I have added Bollinger Bands which shows this recent move coming back to the middle band. I favour one final fling up to the upper band to end the rally once and for all. The upper band currently stands at 96.2c. Only 10 pips from the 88.6% Fibonacci level. Hmmm.

I suspect September will see a big reversal and end up being a bullish outside reversal month. In fact, it is my opinion that the September price range will encompass the whole trading range since April 2014. That is the low is lower than 92.03c (already done) while the high will be higher than 95.04c. Let’s see.

In conclusion, a move down like we have witnessed the last couple of days can be quite intimidating. It’s a bit like catching a falling knife. I won’t be involved as I generally don’t like trading against the main trend. Instead, I continue to wait patiently for the next big play short opportunity which I expect to occur when the AUDUSD gets up above 96c.

Until then…………..

By Austin Galt

www.thevoodooanalyst.com

Austin Galt is The Voodoo Analyst. I have studied charts for over 20 years and am currently a private trader. Several years ago I worked as a licensed advisor with a well known Australian stock broker. While there was an abundance of fundamental analysts, there seemed to be a dearth of technical analysts. My aim here is to provide my view of technical analysis that is both intriguing and misunderstood by many. I like to refer to it as the black magic of stock market analysis.

My website is www.thevoodooanalyst.com

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Only logged in users are allowed to post comments. Register/ Log in

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.