AUD/USD Weekly Picture up to 02-05-2008

The AUD/USD weekly chart that we have in front of us is showing a pair in an up trend. The problem is that we are starting to see divergences and signs of weakness. It is not to say that the bull is over, but only to make the reader aware about the possibility of some ugly moments ahead.

First, we want to review the bullish elements that we are still discerning here:

On the price side, you can see that the 0.855 area was tested twice in the not so long past (violet rectangle). This area was the 50% Fibonacci retracement of the big move up from 0.77 to the top at 0.94. It was also the 200 DMA and the lower Bollinger band area. Such a double event is usually a sign of a bottom. Another bullish point is that the pair is over its medium and long term moving averages and in the high end of the ascending channel.

The Stochastic and MACD DIFF, are coming to their respective limit for re-entry the bullish side of the equation. By their forceful move up, there is a good chance that the STOC will overcome the 50 barrier and that the DIFF will be positive again.

Last but not least, there is a possibility of a W shape in creation. If the pair will stop its resent descent near 0.89 (blue line) and rebound, we will get a very bullish pattern.

On the other hand, we can see bad signs on the horizon:

The RSI is showing a bearish divergence between the latest tops and is creating a contracting triangle. The STOC went down much more in the last correction.

Conclusion:

The pair is still bullish but has something to prove. The last correction would better stop at 0.89 and reverse and by so doing giving a great bullish pattern. Also, the RSI triangle should resolve to the downside to eliminate the bearish divergence.

Disclaimer

By no means do any part of this article recommends, advocates or urges the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author and his company express personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this article. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. The content of this article was created with the best known data at the time. The writer and his company are not responsible for the accuracy or completeness of the mentioned data. The writer is not a registered consultant of any kind and so the reader should not see any single part or the whole analysis as an advice for any kind of action in the financial markets.
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About the Author

Moshe Shalom Head of Technical Analysis Department ForexManage Ltd Site: www.forexmanage.com Email: This email address is being protected from spam bots, you need Javascript enabled to view it