Much like the Australian cricket team who continue to dominate on the pitch, in the world of currencies it is the Australian dollar which has steamrollered the competition, with today’s wide spread up candle for the AUD/USD, one of the most significant moves ever seen, and also reflected in related Aussie dollar pairs. The catalyst cited for the dramatic move higher has been many and varied, but in particular the recent comments from Governor Stevens, a rise in iron ore prices, and continued weakness in the US dollar have all combined to provide today’s explosive move higher. The comments from the RBA were couched in terms of a ‘no comment’ on a move in interest rates next week, which the market has perceived as a signal that interest rates will not be cut, whilst iron ore prices have been increasing in the last few months with demand from China continuing to remain strong. Finally, of course, the US dollar continues to remain weak following its meteoric rise of the last few months with dovish comments from the FED continuing to weigh heavily on the currency of first reserve. Tomorrow’s key Advance GDP number plus the FED, this could set the tone for the US dollar as we move into the summer months. Certainly on the monthly dollar index chart, the strong up candle of March low looks as though it will be mirrored with an equally strong down candle for April.
Moving to the daily chart for the AUD/USD today’s price action is self evident, with the pair surging through the 0.7850 resistance region and powering on towards the next minor level now in place at 0.8050 denoted with the blue dotted line. However, what is perhaps more revealing about today’s move is the associated volume, which appears to be settling at a lower level than previous days, which is unusual to say the least. Whilst this is not an anomaly as such, the volume required to drive such a move should be ultra high and not average. Indeed yesterday’s up candle serves as a good benchmark, with a modest up candle matched with modest volume and confirming the move. Today’s price volume relationship is out of balance, suggesting a degree of spoofing in the market on thin volumes and with ‘johnny come lately’ bullish traders jumping on the bandwagon, likely to be caught out in any reversal in due course. Indeed the currency strength indicator to the left of the chart reflects the current picture well, with the blue line, the Aussie dollar now deep in overbought territory on the 4 hour timeframe, with the US dollar the red line equally heavily oversold and setting up for a snap back reversal in due course.
By Anna Coulling
Charts are from NinjaTrader and the trading indicators from Quantum Trading.
Hi Anna
First I want to thank you so much for your books.
I have been reading and still am the three dimensional approach to forex trading .
It’s the book that taught me more about the topic with a serious angle on all the markets and their relationship . I was giggling when I read in the introduction that you have italian blood
And Italians have always an opinion about everything . I am from Rome originally.
I come from a philophical and creative background and I would love to get to meet you and have a chat with fellow traders as I never get a chance to in my circle. People think I am a bit off doing trading. But I love it and find it highly artistic as well .
I saw one of your webinar and would like to know when it’s the next london meet up that you do I can join and have a chat ?
Thanks a lot again
To your spiritual wealth
Have a great weekend .
Thank you
Matteo
Hi Matteo – first of all thank you so much for your very kind comments and thank you also for investing in the books which is much appreciated, and lovely to meet a fellow Italian/Brit. My family originates from outside Rome, and I do travel back several times a year and indeed will be leaving the UK soon for a few weeks in a place called San Felice Circeo, which is midway between Rome and Naples – by the sea:-) We have to drive so that our two small dogs can come along too – they hate the journey but love it when we are there and in particular when they are on the beach – one tries to catch crabs and the other drinks the seawater! Food is sublime as always and having coffee in our favourite coffee shop each morning is just bliss. May and early June is just perfect – not too hot and not too many tourists, and we also run our weekly webinars from there too! With regard to the London Meetup, we used to host this for FXstreet, but they have now taken on some other speakers and hosts so we are no longer required. However, David and I plan to start our own group soon where we can meet up with traders in an informal way and chat and discuss how to implement the trading methodology that we follow, namely volume price analysis. Many thanks once again and do keep in touch as it would be lovely to meet up – have a super weekend too and happy trading next week with the British pound in focus ahead of the election! All best wishes – Anna
Hi Anna and thanks so much for your reply .
I am a sailor and know quite well those coasts and sea. I am sure you are going to enjoy it very much and your two dogs too. As you say perfect time not to hot not much people.
I thought always parts of the freedom of trading is that wherever you are as long as you are connected you can work 😉
I ll follow, the webinars and please,let me know about your group as I d love to meet and have a chat with a good glass of red wine .
Enjoy your holidays . See you soon.
Matteo