AUD/USD Sea Change

The AUD/USD pair bounced off an important support level in the last 36 hours, at 1.0150. Today, stronger than expected jobs numbers in Australia added support, but the big picture is deteriorating. A fall through the key support not only signals potential substantial falls, but a sea change in market behaviour.

AUD/USD Weekly

20130509 aud

The range-bound, low volatility trading in AUD/USD over the last ten months is  the exception rather than the rule in this five year snapshot. Tightly bound in a four and a half big figure range, this sideways trading forced historical volatility to five year lows.

This is likely to change should the 1.0150 level fail. Falls to the low 90’s are possible, establishing a downtrend, and volatility will almost certainly rise. Implications for traders are profound.

Firstly, those trading on charts may wish to consider whether the signals working over the last ten months will remain effective. A more volatile, trending market may push oscillators and stochastics to the back bench. Instead, momentum and trend based technical indicators could become the traders choice. Stop loss orders may be placed farther from entries, and fluctuation assessment tools like the Average True Range could come back into favour.

More immediately, traders placing stop entry orders to trade any failure at 1.0150 may consider using wider boundaries on their orders, to ensure they enter what may be a faster moving market. Something like:

20130509 aud tkt

About michaelmccarthycmc

Chief Market Strategist - CMC Markets and Stockbroking Regular on ABC, BBC, Bloomberg, Channel TEN, CNBC, SBS and SKY
This entry was posted in Forex, Trading and tagged , , , , , . Bookmark the permalink.

3 Responses to AUD/USD Sea Change

  1. Chris says:

    Nice trade. Would be in the money this morning.

  2. Ritche says:

    Do you hold any weight to the idea of a contracting triangle on the weekly chart. Wave E should hit the lower line at around .99. With a 100% of wave A price target of 113?? I guess we will find out this week.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s