The above weekly chart of the AUD/USD clearly shows that Australian dollar has decisively broken below its rising range that has been in place since 2015. In the last to last week of April, it broke below the range instead of a bounce back and has so far stayed below
So, is the Australian dollar in a sell breakout?
While the price movement tends to suggest that the AUD/USD in sell breakout, it is missing one key component and that is momentum. The indicator at the bottom of the chart is the Rate of Change (ROC), which is momentum indicator and clearly showing that the sell side is clearly losing momentum, which is not at all a healthy sign of a sell breakout.
In addition to that, have a close look at the last week’s candle in the above chart, which is Doji (almost Dragonfly Doji), which clearly suggests that speculators not only remain indecisive about the next move in AUD/USD but this sell breakout could easily be a false breakout.
A strong dollar as of now, helping the sell side, which might change quickly as we expect weakness in the dollar going ahead.
Our stance:
In our last review, after the break, https://www.econotimes.com/FxWirePro-Call-Review-AUD-USD-likely-to-decline-further-as-rising-range-breaks-1290483
We suggested,
“this break doesn’t threaten our longer-term bullish outlook for the AUD/USD and the stop loss for the trade is still far away at 0.68 area. Nevertheless, this break demands a re-assessment and we believe that one can take up one of the three possible actions,
- Maintain the long positions that we entered around 0.763 and keep buying AUD/USD at lower prices, which would bring down the average price of purchase for the longer horizon call.
- Square off positions at 100 pips loss and wait for the opportune moment to renter bullish positions.
- Play short term short side. If this is your preference, our calculations suggest that AUD/USD can decline to as low as 0.708 area. The interim targets are 0.74 area and 0.72 area.”
Our preference remains on the Buy side.
