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AUSTRALIAN DOLLAR TRADING BAND

  • Daryl Guppy
  • 20 April 2017

The Australian dollar remains trapped in a sideways trading band for one year and there is little sign of a strong change in trend.

The upper edge of the trading band near US$0.775 was established in 2016 April. The lower edge of the trading band near US$0.715 was first tested in 2016 June. The trend behaviour since 2016 June has been weak with the Australian Dollar essentially moving sideways.

In 2016 November, the Australian dollar retreated strongly from resistance near US$0.775 and by 2016 December was testing the support level near US$0.715. The rebound rally from this level confirmed the strength of the trading band.

The sharp fall from US$0.775 to US$0.715 and the sharp rallies from $0.715 to $0.775 offered good trading opportunities but they do not indicate strong trend changes.

 

We use Guppy Multiple Moving Averages  indicator analysis to identify trend strength and trend changes. In these situations, it is a powerful analysis tool.  The GMMA is not the best indicator to apply to understand a sideways market. The GMMA relationships simply show that investors are not strongly bearish or bullish on the Australian dollar. This is shown by the narrow separation in the long term GMMA and its horizontal behavior.

This non-trending environment shows no signals of trend change and GMMA analysis is not a useful strategic analysis tool. However, trend line and trade band analysis allows the trader to identify the significant trend break points and establish targets.

The Australian dollar weekly chart has a well-defined resistance level near US$0.775. The US$0.77 - US$0.775 resistance level has been tested 8 times in the past 12 months. This level is again acting as a successful resistance level with the Australian dollar developing a retreat to US$0.75. A breakout above this level can move rapidly to the next resistance feature.

A second resistance feature on the chart is the upsloping trend line starting from the low of US$0.68 in 2016 January. The second anchor point is the low of US$0.715 in 2016 June.  The uptrend line acts as a future resistance feature.  The line is projected forward and given a current value near US$0.80. This is also near an historical resistance level so this acts as a double resistance feature.  This combination of features indicates a limited upside for the Australian dollar.

The strength of resistance near US$0.775 suggests there is a low probability an upside breakout so traders look for a continuation of the sideways trading band.

A fall below minor support near US$0.75 has trading band support near US$0.715.

This is not a trending market so traders apply short term trading methods to capture the rally and retreat behavior. We use the ANTSSYS trade and analysis method to identify the opportunities as the retreat rebound develops.


About the Author
Daryl Guppy (Australia)
Known as the “CNBC Chartman”, Technical Analysis Expert, International Investment Master, Daryl is an active private position trader trading equities and associated derivatives markets.

Daryl Guppy is Founder and Director of Guppytraders.com Pty Ltd. He is an active private position trader trading equities and associated derivatives markets. His most recent book is ‘The 36 Strategies of the Chinese for Financial Traders’. He is the author of several books including ‘Share Trading’, ‘Trading Tactics’, ‘Bear Trading’, ‘Chart Trading’, ‘Trading Asian Shares’, ‘Market Trading Tactics’, ‘Better Trading’, ‘Better Stock Trading’, ‘Snapshot Trading’. Several of these books are also available in Chinese & Italian, in particular, ‘Trend Trading’ has become a best seller and is available in Chinese.

Daryl developed the Guppy Multiple Moving Average indicator which is included in DZHI Advisor, Metastock, OmniTrader and other charting programs. He delivers accredited courses for the Singapore Exchange and Society of Remisiers, Singapore. He is an appointed foundation member of the Australian Government Shareholders and Investors Advisory Council. He is a regular technical analyst commentator and guest host on CNBC Asia Squawk Box.

As a technical trader, he relies mainly on chart and live market information to make trading decisions. He is the publisher of a weekly Internet newsletter Tutorials in Applied Technical Analysis, which explains technical analysis techniques and shows how they are applied to current markets. There are Australian, Asia, China and India editions of the newsletter, with each concentrating on local market solutions and trading education.

He is a regular contributor to the Sydney Futures Exchange magazine - Your Trading Edge, the US trading magazines - Technical Analysis of Stocks and Commodities, Active Trader, Working Money, Bridge Trader, Australia's Shares and Personal Investment magazines, Singapore's Smart Investor magazine and The Edge business weekly and Personal Money in Malaysia. He has a regular column in China's Weekly on Stocks magazine and in Shanghai Securities News. He also contributes to Poland's Professional Investor and provided sector analysis on the Singapore, Hong Kong, Malaysia and Philippines markets for i-invest handbooks.

He edited and contributed new material to the Australian editions of the US classics in the International Investors Bookshelf series, The Basics of Speculating and Day Trader's Advantage and Options: Trading Strategies That Work and Trading Rules and Mastering Technical Analysis. He prepared the introduction to the Australian editions of Breaking the Black Box (M Pring), A Technician's Guide to Day Trading (M Pring) and New Thinking in Technical Analysis (R Bensignor).

He provides web content to Sanford online brokerage, Reuters, On Line Trading systems, the Society of Remisiers, Singapore, Asiastockwatch, Telstra Big Pond Money and Quicken, Singapore. He provides charting chat room support and is co-host for the stockmeetingplace traders forum.

He trades from Darwin in the Northern Territory, of Australia, some 3,000kms from the nearest Exchange. As a result he makes full use of electronic advantages to actively trade the market and to keep in contact with other Australian and overseas traders.

He gives conference briefings for brokerage private clients. He is a featured speaker at the Australian Traders Expo, for the Sydney Futures Exchange Conference days around Australia and New Zealand, and at the Australian Technical Analysts Association annual national conferences. He was one of the speakers in the first Australian Equis Metastock seminar series. He also spoke at the On Line Trading Summit in San Diego which was webcast to traders throughout the world, and at the Technical Analysis Trading Forum in Orlando. He has spoken at trading conferences in Italy and France. He has also spoken frequently at all the major Australian Stock Exchanges, and for brokerage firms.

He was one of two foreigners (Jim Rogers and Daryl Guppy) to participate in the 2005 Chinese market outlook conference in Beijing which was broadcast throughout China. He is a keynote speaker at the 2007 China Capital Markets Investment Forum. His analysis has been presented at the 2005 Palm Oil Outlook conference sponsored by Bursa Malaysia and the BYSD Annual conference in Turkey. He is a regular speaker at the annual ASEAN Rubber Conference and at financial trading seminars in Shanghai, Beijing and Shenzhen.

He presents Certified Professional Training modules for charting and advanced technical analysis for the Singapore Stock Exchange and the Society of Remisiers, Singapore and the Hong Kong Securities Institute. He has worked with the Singapore and Australian Stock Exchanges to promote their cross trading link. He worked with Reuters Hong Kong to deliver trading and training workshops. He was the lecturer for the Casuarina Senior College charting course.

He also runs public trading workshops, and equity and futures brokerage sponsored seminars for clients such as National On Line trading, CMC Markets, Beijing SEEC in Australia, Kuala Lumpur, Singapore, Shanghai, Dalian and Paris. He provides in-house training support for fund managers, brokerage dealers and remisiers.

He presented several on-line workshop conferences for Pristine.com and Compuserve Investors Forum. He has appears regularly on CNBC Asia, Squawk Box as guest host technical analyst, Asian Wall Street Journal, Trading Day, Channel News Asia and ABC radio and television.

He was retained as a consultant by several Australian and Singaporean brokerages and financial portals to advise on the development of Internet based brokerage, trading and information services. He is a member of the Australian Technical Analysts Association, the Technical Analysts Society of Singapore and the International Federation of Technical Analysts.


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