The degree of separation in the long term group is consistent. More importantly, when a sell-off occurs and price dips towards the long term GMMA there is no compression. This suggests investors are aggressively buying on any price dips and this shows strong trend support.
This strong trend support enables a relatively high level of trading activity with rally and retreats of $0.03 to $0.05 in a short time frames. This is price volatility. The price trend is defined with the trend line starting in March 2009.
The second anchor point is in July and the third in September. This line is placed with the benefit of hindsight and it is use dot manage the trend going forward from October. The position of this trend line is a broad guide to trending behaviour. Between March and July the price moved well above the trend line. This suggests the trend line is not the best tool for defining the trend change.
Currently a fall below the trend line is not confirmed with an almost simultaneous fall below the lower edge of the long term GMMA. This may result in a false exit signal. This is important because it makes it more difficult to select the appropriate end of trend exit signal. This condition also underlines the potential instability in the trend from a technical perspective.
So how high can the Aussie go, and how do we decide this?
The target level is $0.95 before Christmas, with a potential spike towards $0.97. The weekly chart gives a better idea of how these conclusions are reached. There are three key support and resistance levels. The lowest is at $0.84. The midpoint is near $0.89. The highest is near $0.95. The breakout above $0.89 sets the upside target near $0.95. This is not a smooth ride. Previous volatility has included volatility falls of $0.04 between these trading bands.
A move above $0.95 hits historical resistance and likely central bank intervention near $0.97 and above. This has a low probability of developing a consolidation pattern. There is a higher probability of developing a trend break and trend reversal.
The Aussie is vulnerable to a rapid trend break. The history in July 2008 shows how quickly parity poison can work. But in 2008 the trend break was confirmed with a fall below the long term GMMA and a fall below the trend line which was almost at the same value. Today is different with the trend line value well above the lower edge of the long term GMMA and that could be poison for traders focussed on parity.
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.