Should you trade the strongest vs weakest currency pair?
AUDUSD is the pair in focus but what should we look out for?
Watch the video to learn more…
Hi, and welcome to this Blueberry Markets video update with me, John Kibbler, head currency analyst.
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In this video, we’re going to look at the strongest currency versus the weakest. It’s going to be the Australian Dollar versus the US Dollars. You can see the strength and weakness table here. We can see that the Australian Dollar moved from that reversal situation and gained plus six. The US Dollar lost a few places again in that reversal situation and lost values.
AUD/USD shows us that there’s some potential for this market to move to the upside, but you’ve got to take a few considerations here. Now, on the left-hand side, you can see I’ve got the US Dollar index futures seasonal chart. Typically at the low of September, we see the market rally through to the end of November. However, it can sometimes take a dip through October, and then continue its move to the upside. Maybe this is what we’re seeing here at the moment.
I just wanted to reference this because obviously, we looked in the market outlook that the Dollar was weakening. We looked at this seasonal bias a few weeks before, when we were looking in September. We can see here if this market is going to take a dip and then a breakout that we could be looking for maybe some short-term upside for that further downside on our majors.
Looking for the potential for the AUD/USD to maybe form that double top pattern that we spoke about in the outlook, and then that Dollar strength through sort of the end middle to end of October could be then on the cards for pushing through just looking at this sort of seasonal chart through here.
If I bring in the Aussie US Dollar chart, I know we went over this yesterday in the Forex Market Outlook. But what we were looking at, if you haven’t seen that video, was the fact that the market is technically trending up on a weekly time frame and came back down into these previous structure highs. When I’m looking at the trend, I’m always looking at the potential for previous structure high, which was a resistance acting as support as price breaks through and continues that trend.
We’ve got that sort of similar situation here, where we were at this point. The market was saying to us that the Australian Dollar was weak, Dollar was strong, and then we had that in those reversal zones, which is now looking like that weekly is going to continue to the upside.
If I go down into the daily time frame, we can see that price at the moment is forming that sort of higher high pattern. Now what’s going to be crucial here is the fact that you know we were making these lower lows just through there, lower highs prices then broke and closed above the high.
But to complete that breakout, we want to see that two clear higher highs. If we get two clear higher highs or at least two closes above this high, it would suggest to me that the AUD/USD could continue to the upside in the short term and I say the short-term because the previous weekly highs are seeing up here around about that 0.7380 to 0.7410 area through there. That’s where I’m expecting the market to maybe retesting before that Dollar strength comes back through. What we need to confirm is that our secondary close above these highs.
If we get those second closes above, confirms that there’s some potential upside to be had, and we can look for short term long opportunities. If we get a false break out, however, and we do see a bit of a bearish close towards this area, then it would suggest that maybe that we could still be seeing a little bit of swinging between that Dollar strength and weakness,. We could maybe, ideally sit out of the market until we get some clear direction again, with either a sort of a break of this low through there for instance and a break of the key-level.
But, to me at the moment, this is looking like it’s more upside to come. Going into that four-hour time frame, we can see quite clearly the price is trending up. On the four-hour time frame, which I always say is a very key time frame to look at, We’ve got this nice little trend through here. Did break the trend, this is where we were expecting that downside to come through, but it just didn’t change trend again, broke higher, formed that higher highs. Now we’re just retesting these structure points.
So is the market going to bounce from this area, break higher, form new highs? That’s what we’re looking for and looking for that continuation up. Short term, I think AUD/USD is strongest against the weak currency. We could see a continued rally up into this key weekly zone and then potentially seeing that Dollar seasonal play through there.
Thanks for watching this video update, and I’ll catch you in the next one.
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