Happy New Year Traders!
This is the first price action setup for 2015 – a market we’ve been watching closely, the AUDNZD daily chart.
We’ve been putting up a few posts in the War Room and have been talking about it a lot in the commentary, focusing on the all time low monthly support level that has been breached.
Now the market is testing this old support level as new resistance by rejecting moves higher into it.
Last session we got a small bearish rejection candle, where the upper tails demonstrated the bearish reaction to the only monthly support.
Because the candle is small in range – it would be better to only consider taking breakout trades with any bearish momentum that may develop next week.
Michael
Happy New Year!
I’m really fresh with Forex and probably saying something stupid but in some tricky situation (like the one above), I’m trying to compare my planned moved to third currency especially if both of them are traded with an USD.
If we’ll make a simple math calculation we’ll see that for the same day of our rejection candle NZD “lost” to USD a little bit more than AUD to USD (which would point that AUD is a little bit stronger than NZD)
I know that such comparison is not a proper Price Action tool and the delta to USD between these two aren’t big but it is NOT in a favor of our planned move (short on AUDNZD) so for me it would add one more reason to take it extra carefully.
Just my 2 cents…
Michael R.
Replying to: Michael
Dale WoodsAuthor
Hi Michael,
Thanks for your intelligent input.
I try not to ‘overthink’ Forex and just stick with what the price action is telling me. People who are mathematically minded like yourself often fall into the trap of being over analytical. Instead of looking at Forex as a mathematical puzzle – I believe when you look at the market you’re peering into the collected psychology of the market, and therefore will trade directly off the raw price movements, utilizing recurring patterns, like this rejection candle, to anticipate future price movement.