This is my contribution to Erwin’s discussion on the AUDUSD in his blog.
What is different in my chart is the introduction of another trendline – one that is steeper.
Trendlines have 2 commonly discussed values:
- Gradient of trendline defines trend
- It acts as support and resistance
Another important input that a trader can get from trendlines is the momentum of a trend. The steeper a trendline, the stronger the trend, the more momentum price has, the more it takes for a reversal but also the more likely for a violation/retracement.
The blue line is such a steep line (1.). A trader would who has an existing position would be happy with the speed of movement downwards whereas one looking for a low-risk entry would be wary of a short term violation.
Therefore, the gentler yellow line (2.) is a reasonable place to look for a low-risk short. A goodway is to look for a level with as many confluence.
Lastly, a long-side view should only come in if we see a reversal chart pattern and if the gentle trendline is violated decisively as well.
Moment of Aussie is strong but possible short term violation likely
