Has the AUDUSD Trend Turned

DailyFX

Article Summary: Recent price action suggests that the AUDUSD may be developing a new trend. Today we will identify market direction using momentum analysis.

Prior to last week’s trading, the AUDUSD was a currency pair making steady declines and continually moving toward lower lows. Even though the pair has declined as much as 818 pips over the past three months, price has recently been seen pressing higher. This upward momentum has many short term scalpers questioning if there isn’t a trend turn developing in the market. One way to find out is through utilizing a series of momentum analysis techniques. So has the AUDUSD turned?

Learn Forex –AUDUSD Daily Trend

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Has_the_AUDUSD_Trend_Turned_body_Picture_2.png, Has the AUDUSD Trend Turned

(Created using FXCM’s Marketscope 2.0 charts)

When the market turns from its primary trend, short term Forex scalpers will want to ensure that price direction has indeed decided on a new direction. This can be a helpful step and help traders to potentially avoid trading into a false breakout while fighting longer term market momentum. One way to identify new short term momentum is to divide the previous week’s trading into two distinct pricing blocks. The key to this analysis is to ensure that price is moving in one direction and to identify any points where the chart may differ from the established long term trend. To get a better example let’s take a closer look at the AUDUSD and its short term trend.

Below we can see the current AUDUSD 30min chart, divided into two pricing blocks. Block One is formed from last Sunday the 1st through Wednesday the 4th. During this period we can see the start of the AUDUSD fresh upward momentum. This advance was immediately followed by another high created in Block 2, culminating in a move of over 293 in the course of last week’s trading. Normally a new set of higher highs is the sign price action gives to the creation of a new uptrend. So let’s see how this relates to current price and find out if our trend has turned for this week’s trading.

Learn Forex –AUDUSD Trading Blocks

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Has_the_AUDUSD_Trend_Turned_body_Picture_1.png, Has the AUDUSD Trend Turned

(Created using FXCM’s Marketscope 2.0 charts)

In the graph above it should be noted that the Block 2 low ended at .9088 on the AUDUSD. Even though price is breaking through new highs today, a turn toward lower lows could mean the resumption of the broader downtrend. Traders should keep an eye on these values because it implies that at least for the present, the AUDUSD and its newly created uptrend still stands. This will allow short term traders continue a bias to buy the AUDUSD on retracements or fresh breakouts.

---Written by Walker England, Trading Instructor

To contact Walker, email wengland@fxcm.com. Follow me on Twitter @WEnglandFX.

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