EURAUD Analysis November 2015 (D,M)
Created on Sunday, 01 November 2015 11:55
Written by Austin Galt
The EURAUD has been trading as expected recently so let’s quickly revisit both the short term and longer term outlook.
EURAUD DAILY CHART
Previous analysis outlined the recent high being the point 4 high in a 5 point broadening top which is not shown here. Price has traded down from there which brings us to the present.
To my eye, there looks to be a little point 5 low playing out with points 1 to 3 already in place. That means price is now on its way to put in a point 4 high. Then the downtrend should resume. This pattern really just shows human behaviour repeating with the whipsaw action that aims to confuse the crowd.
The Bollinger Bands show price bouncing off the lower band and now milling around the middle band. A move back to the lower band is certainly a possibility and would likely see the downtrend really let loose. However, I favour a corrective move that gets back up to the upper band.
The PSAR indicator still retains a bearish bias with resistance, denoted by the dots, just holding off the advance last Friday. So, while a move down is certainly a good chance I favour price moving back up and busting the dots on the upside. Why?
The recent low showed a bullish divergence on the RSI and Stochastic indicator while both the Stochastic and MACD indicators are both currently bullish.
Let’s now revise the bigger picture using the monthly chart.
EURAUD MONTHLY CHART
Once again, we have a broadening price formation in play. This time it is a 5 point broadening top already in place and I suspect this will eventually morph into a 7 point broadening top.
The Bollinger Bands show the point 5 high was well above the upper band which is a common feature of solid tops.
The Stochastic indicator has just made a bearish crossover while the MACD indicator shows the averages have diverged and I expect a bearish crossover here in the near future.
I have added Fibonacci retracement levels of the move up and I am targeting price to eventually put in the point 6 low between the 76.4% and 88.6% levels which stand at 1.2784 and 1.2177 respectively.
Now, while it is not my current expectation, it is quite possible for the point 6 low to break to new yearly lows below the August 2012 low of 1.1609. Why?
I have added moving averages with time periods of 50 (blue), 100 (red) and 200 (black). These are all in bearish order signifying the monthly trend is clearly still down. The recent point 5 high was bang on resistance from the 200ma which is now trending down.
So, bulls need to be warned that an even bigger downtrend than I currently expect is a clear and present danger!