GO
Loading...

Aussie to Stay Under Pressure for Awhile: Charts

When the Australian dollar stumbles, it often stumbles badly. This makes the AUD/USDa difficult trading situation because when a collapse occurs, the AUD tumbles quickly.

Investors hoping for a rebound of the Aussie to beyond the $0.90 level may be disappointed. Chart analysis shows this is unlikely to happen for awhile.

The dominant feature on the AUD/Dollar weekly chart is the substantial and reliable resistance near $0.94. This has capped every attempt at the parity party for since late 2007. The pop to $0.98 gave a brief bit of excitement but it was a temporary feature. Resistance near $0.94 is strong. Support on the lower edge of the trading band near $0.885 is not as reliable. The width of the trading band is measured and the projected downside target is near $0.83. This does not give a reliable support target in this instance as historical support is lower near $0.81.

The Guppy Multiple Moving Average indicator shows trend weakness began to develop in December 2009. The current trend collapse was signaled with a GMMA compression and crossover early in May. The long term group of GMMA averages is well separated and this reduces the probability a rebound from support will develop successfully into a new trend.

The longer term upside target is near $0.885 but there is well established historical support/ resistance near $0.87. Short term rebounds provide tradable volatility but there remains a good probability of a retreat and retest at levels below $0.84.

The GMMA shows a significant change in trend pressure rather than just a temporary decline. This time it will take more than an Australian reserve bank rise in interest rates to put life back into the long side trade in the AUD/US dollar.

Daryl Guppy is a trader and author of Trend Trading, The 36 Strategies of the Chinese for Financial Traders –www.guppytraders.com. He is a regular guest on CNBC's Asia Squawk Box. He is a speaker at trading conferences in China, Asia, Australia and Europe.

If you would like Daryl to chart a specific stock, commodity or currency, please write to us at ChartingAsia@cnbc.com. We welcome all questions, comments and requests.

CNBC assumes no responsibility for any losses, damages or liability whatsoever suffered or incurred by any person, resulting from or attributable to the use of the information published on this site. User is using this information at his/her sole risk.

  • Daryl Guppy is an independent technical analyst who appears frequently on CNBC Asia.

Asia Economy