This week, we have a slew of questions all about #AUD, understandable in light of tomorrow’s RBA news.
AUDSGD, AUDJPY, AUDNZD, AUDUSD
Questions from Ben (Dated 1st May 2015)
Based on the last 2 speeches by RBA Stevens, it seems to be highly unlikely that RBA will raise I/R in May’s meeting. Improvement in Iron ore prices and CPI Q/Q that is released this month is 0.2% same as Jan result. These seems to set some tone for May’s meeting. Hence, we shouldn’t be looking at SHORTING aussie dollar and instead should be looking at BUY set up.However, AUD seems to be retracing downwards NOW losing steam against most of the AUD majors – SGD, JPY, NZD & USD.
1) However, AUD/SGD seems to be the most attractive to be in terms of SHORT set up. Do you think so ?
In AUD/SGD #1 attachment below:
Price was rejected by the previous LOW which is also a 2YL, forming an evening Doji Star pattern with a WR of point 2 falling nicely in place now still within the ED channel.
The rejection took place around Fibo retracement F6 & F7 region and price didnt close above F6, tested and rejected. Hence, resistance for point 4 is clearly strong and justifiable for a good Short trade.2) As for AUD/NZD, NZD has been really weak since the beginning of this week. Theres a bullish expansion yesterday but didnt manage to close higher after forming point 4. Price is Point 2 and 4 is quite far away from each other and has also broken out of the Downwards ED channel as shown in AUD:NZD #1. Price also tested the 2YL region but didnt managed to close ABOVE it, so price action shows that 2YL and previous low is respected.
Looking at the monthly chart in AUD:NZD #2, price ding dong-ing between 2YL region is also a historical symbolic pricing where its a key support in year 2005 Nov & Dec.3) As for AUD/JPY, which Binni Pointed out, there’s also a DAY close below point 2 yesterday after forming of point 4 and WR. Price was rejected by the red colour resistance region forming a evening Doji Star pattern as shown in AUD/JPY #1. The red colour region (Key resistance pull back zone) is also the F6 & F7 Fibo retracement. Does this mean its also a good Short trade to take note of ?4) As for AUD/USD, its also the same as AUD/SGD & AUD/JPY, as shown in AUD/USD #1, with the exception it has broken out of it ED at the moment due to weakness in USD this period.Are these part of the BEAR trap as market take profits of their Long positions before RBA meeting next week, hence we should not jump in with the WR trigger this week. Some more its Friday already, what do you think? How should we go about tackling AUD pairs ahead of RBA rate review next week?
Reply from Jerome
- Trend is still down, with no changes to suggests any bullishness.
- Agree on the 1234 pattern.
- In H4 time frame, price has broken below the low of the channel and is retesting it and the resistance zone.
- If price maintains below the resistance, a downward continuation is likely.
- Immediate support comes in the form of the month low of Feb 2015.
- Not really sure what your plan is.
- In general, there is a Bullish expansion on AUDNZD with a subsequent higher high and higher low. This constitutes an immediate uptrend or a strong bullish sentiment at the moment.
- However, price is currently seen testing a resistance of previous year low.
- The implication is, yes, though price is bullish, but it is also at resistance. This could provide some short term opportunity to play upon the reaction to the resistance.
- Near the resistance, we can see price has had a previous Bull Trap / WR. Currently price has tested this resistance and has formed a small 1234 pattern.
- Don’t aim too far for this with immediate supports coming in at F3 and a previous week high.
- This also means stop loss should not be too far away from the year low to have a quick 1:1 RRR.
- Yes, based on this tweet on AUDJPY, it shows that price is retracing to retest a previous pt2 of a big 1234 pattern. This also created the “smaller” 1234 pattern on the D1 chart.
- Some immediate support could be week 14 – 16 low.
- Tionghum just updated a comprehensive blog post on this pair. It can be found here.
Question from Ben (Updated 5 May 2015)
Thank you very much for clearing my doubts over the last few emails, it makes our learning journey with Terraseeds more fruitful & meaningful.
I have attached fibo #1 & #2 on EURGBP pair.
How should we position our fibo retracement for a better analysis ? Is #1 or #2 the correct way?
I would like to check with you my Point 2 of 1234, according to pic Fibo #1, my point 2 is at price 0.7369-0.7370 range, which is also the FIB retracement F6 price.
However, there is a bullish expansion last week which close above the F6 price.
But if i were to draw Fibo #2 way, retracement (Pull Back) is still very far away from F6/F7 zone to consider setting up short position.
Ideal set up is when Point 2 is at FIb-R F6 pricing and there is a formation of point 4 follow by WR and close below point 2.
Hence for this case, its better to wait for a WEEK close below point 2 (0.7370) rather than a day close because of the bullish expansion.
But we also note that last week price is being resisted at previous LOW as shown in my chart at price 0.7403 to 0.7425 range.
Which also shows a very strong resistance at point 4 which is ideal for a short set up.
But now I’m just concern with the way i drew my fibo each time to find the retracement in price of point 4 and 2 to determine if its a good trade.
Reply from Jerome
There are two things to address here. Firstly, regarding where should you start drawing the Fib. There is no perfect model answer for this question. However there are usually two points you consider when drawing a Fib.
- Do you want to consider the overall larger picture?
- Or are you more concerned with the more recent move?
If you are looking at the overall larger picture, then identify where is the entire flow is and draw the Fib using that as a guide. Using EURGBP as an example, we see that the recent upward move can be seen as just a 38.2% retracement against the most recent down move. This way of using the Fib would be to build a big picture view of the particular price pair.
However if you’re more concerned with the recent picture. Then identify where is the most recent flow and use that as the guide for your Fib. This would be the method preferred while looking for Fib levels for pt4.
The second thing to address is the question of multiple timeframes. A lot has been written about this topic which I think could be worth a few minutes to read.
- GBPNZD : Making sense of Multiple Timeframe
- How to fine-tune a forex trade and analyse in multiple timeframe
- How to trigger on lower time frame? USDJPY example
To avoid confusion, I always apply this rule of thumb. If the pattern is on X timeframe, then wait for X candle to close. Eg: If its a D1 pattern, then a D1 candle close. If its a D1 pattern and I’m looking for a H4 close then I know I’m doing fine-tuning and should more be careful.
So in the case of EURGBP. I agree with you that I would see this as a Weekly pattern. Especially with the previous week’s bullish expansion/bullish engulfing. So a week close is preferred. After, you can always wait for price to do a pull back to re-test pt2 (2 month high).
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