Bearish signal for Aussie Dollar (Ichimoku)

Updated: Sep 13, 2019

There are multiple currency pairs, indexes and stocks that we track on a regular basis. Fundamental analysis added to Technical analysis firms a trader's belief on likelihood of the direction an instrument's price will take. Based on how strong this belief is (add to it the gut feeling!), Trader can decide entry and exit levels, and thus place a Buy or Sell trade.

While there is no suggestion to ignore the fundamentals (there are many these days that are impacting global markets), our focus here is going to be on technical analysis of the AUD vs USD currency pair. We start with a long term view of price performance using weekly chart. Very much sideways traversal since more than a year now, within narrow range (as indicated by grey horizontal line). Long term view suggests that this is going to be the zone where we will see further price action for $AUDUSD in near to mid term. Break above or break below this region will require some solid strength gathering or else weakness.

FOREX trades are not BUY and HOLD trades unlike stocks. Traders will usually look for shorter time-frame positions, mostly intraday, to make gains. Thus we drill our analysis further down to shorter time frame. Here is my daily chart with Ichimoku Cloud indicator.

This indicator could appear complicated at a first look given so many lines and shaded regions, however once understood it does appear to give some good signals. Recent price action is encircled in this chart. Here we see a cross-over between Tanken-Sen and Kijun-Sen lines. In addition, price is entering the red cloud (bearish cloud). Both these suggest a bearish trend for instrument price-action. A confirmation of this bearish trend will happen when price crosses cloud and falls further.

From current price-action and current price, its good to place a short or sell trade for AUDUSD currency pair with target at bottom-line of the cloud. A further short trade can be placed thereafter. In general, bearish cloud represent bearish zone for prices, while bullish (blue / green) cloud indicates an upward moving zone.

It will be a good idea to take a charting tool, apply Ichimoku indicator to different time-zones and see this strategy work through for yourself.

As we come across application of different indicators to different instruments prices, we will try to articulate these for our readers / traders.


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