Think Trendlines and the 200 day SMA don’t matter?
I know that’s not something you believe but it’s easy to feel like the charts are being trampled on by the constant barrage of news coming from Europe. I’m here to say that even though it’s easy to forget that when volatility seems to be ruling and the price action pendulum keep swinging back and forth, back and forth…I wanted to write this update mainly because I have been focusing on fundamentals over the course of my recent writings.
Here’s a chart of the daily AUD/USD. If you are a regular reader of the Daily Forex Trading Edge then you know that regardless of the news and data, there must be a way to recognize and measure the way that the information is being discounted into the market. The markets are forward looking and always discounting what it expected to come from around the corner. In this environment - as much as any I have traded in the past two decades - there is so much to digest as the European debt crisis rolls on. It’s hard to believe that it’s been 14 months since Angela Merkel led to charge to support Greece and keep it in the EU.
Past performance is not indicative of future results
The daily AUD/USD broke two key levels, starting with the two-month downtrend line as the pair rallied through the 1.0300 major psychological level and then again as the bulls carried the pair through the 200 day SMA. Notice the initial hesitation before an eventual breakout as each level was met.
Two of the factors surrounding this rally have been the softening U.S. dollar and simultaneously the resurgence of the crude oil over the $90/bbl mark. Risk appetite continues to rule the markets as the optimism play shows little sign of slowing down. Another factor to consider is that as we approach the final two trading months of the year, unless there is a dramatic breakdown in cooperation and open talks in Europe, it’s likely the fund managers will continue to buy equities (more risk appetite) and also commence in the year-end window dressing of names that they must own as 2011 winds to a close (accelerated risk appetite). The EU “plan to plan” is also helping comm-dolls (see the USD/CAD) and it’s likely that we’re seeing the early transition on the daily chart of the AUD/USD to a bullish Directional Bias.
As an active forex trader and Chief Currency Analyst for InterbankFX.com I do write for a number of sites all over the web and I am happy to say that I will be posting updates at www.IBFXconnect.com. My Activity Board will feature the trades from my trading account as well as intraday commentary.
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