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Currencies AUD Top Trade Idea For October 31st, 2014 – AUD/USD

cmcThe US Dollar continued to rally after Wednesday’s FOMC meeting while gold has dropped quite sharply. For technical traders this poses the question of whether the major $US is about to resume.

In most cases, the correction in the $US has been relatively shallow so far. As the chart below shows, the Aussie Dollar, for example has retraced less than 38.2% of the last major move at this stage.

 It’s now possible to draw roughly parallel lines across the peaks and troughs in this latest Aussie Dollar correction creating a channel. The Aussie could be forming a flag pattern. This consists of a near vertical trend leading into the pattern (the flag pole) followed by a channel formation that leans against the direction of the trend. Successful flag patterns are typically associated with shallow corrections of a steep trend.

 In chart pattern theory, a break below the flag support is looked upon as potentially signalling the end of the correction and a resumption of the down trend. So my trade idea is to sell if the current move down in the Aussie extends to a break below the flag support in coming days.

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About Ric Spooner

ric spooner

 Ric Spooner is Chief Market Analyst at CMC Markets in Sydney. He has over 30 years experience in derivates markets, and was previously a Managing Director at Sydney Futures Exchange Clearing, General Manager at JBWere Futures and Manager at Elders Futures.

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