Australian Dollar Strength Near Breakout Opportunity

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By: Jeremy Wagner, Lead Trading Instructor, DailyFX Education

Traders are regularly asking what the strongest trends are in the market. The Australian Dollar (AUD) shows up in the analysis as being in the strongest trend based on price movement for the past 2 weeks.

The Australian Dollar (AUD) shows up in the analysis as being a strong currency to buy.

Now, the question is what other currency do we sell to match up against the AUD? To aid in the analysis, we’ll look at the Daily 200 Simple Moving Average of all the AUD pairs.

(Created using FXCM’s Marketscope 2.0 charts)

I think the Swiss Franc (CHF) is the currency to pair it against making the AUDCHF pair the trend for the week. The price is above the 200 Day SMA (blue line) and price is testing highs from September. If those September highs are broken, then prices would be trading at levels not seen for 5 months.

Therefore, we are looking for buying opportunities as buying the pair would be buying the AUD. One way to trade this would be a breakout out trade with a bullish bias.

(Created using FXCM’s Marketscope 2.0 charts)

A common way traders use breakouts is with price channels (also known as Donchian Channels). Wait to see if prices break above .9308 to buy. Place a stop loss just below the lower channel. This will use an open limit meaning we’ll manually trail the stop loss if the lower price channel moves higher.

Keep in mind that there are many different time frames of trends in the market today. A position trader may consider a weekly and possibly a daily trend in their analysis. A swing trader may use a 2 hr to daily trend when filtering their trades. A day trader and scalper may use a 30 minute to 2 hr trend.

Additional Resources

A Trending Pip Count (Text)

Identifying the Trend (Video)

Lesson 1 Moving Average Video

Trading with Price (Donchian) Channels

---Written by Jeremy Wagner, Lead Trading Instructor, DailyFX Education

To contact Jeremy, email jwagner@dailyfx.com. Follow me on Twitter at @JWagnerFXTrader.

To be added to Jeremy’s e-mail distribution list, send an email with the subject line “Distribution List” to jwagner@dailyfx.com.

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