Applying Technical Analysis on the Aussie Weakness to Identify Best Trading Opportunities

The Australian Dollar weakness is not only noticeable against the US Dollar and Euro (read here) but also against a wide range of other currencies. This post will review a couple of them to pinpoint which currency pair could be the best one to trade besides the AUDUSD.


First thing on the list is: AUDNZD. The Aussie was in a massive downtrend versus the New Zealand Dollar but it managed to fight back and retrace 800 pips (back up). Last week however the AUDNZD posted bearish engulfing twins. This reversal signal happened exactly at the previous broken support which tends to become resistance. Is this an interesting price action signal?

Further downside does seem likely, but there are bullish signals that could be worrying:

  1. The channel (orange lines) was broken to the upside
  2. Price moved with momentum to the upside
  3. Price has layers of support below it

All in all, the bearish engulfing twins could cause some further downside pressure, but traders need to be cautious of the potential support and I would rather take the profit quicker and spread out over various spots (scaling out).

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The Australian Dollar has been in more of equilibrium versus the Canadian Dollar than it has against the NZD. A massive range preceded the “big drop” which hit the Aussie back April-June of 2013. Ever since that bearish momentum price has retraced very sharply back up. Is the correction finished?

  1. Price “took out” the 78.6% Fibonacci retracement which could often be the turning spot
  2. Price failed to post a higher high and is showing signs of weakness
  3. Price broke a bearish triangle (to the downside)
  4. Price however has not managed to break through the weekly bottom

Conclusion: a decent wide open space emerges once price managed to break below bottom (blue line). The bearish potential could be very significant on this currency pair – one to keep an eye on and monitor in my opinion.

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The first basic step in Forex 101 analysis is checking the overall structure of the currency pair: the AUDJPY structure is totally different. The bullish momentum is in fact stronger than the correction which took place after that. Although the market struggled with lots of choppiness, when you look close enough there is in fact an uptrend visible. Furthermore the AUDJPY broke a resistance top and this could easily become a future support level. With an uptrend and strong support below it, the AUDJPY does not seem like a good candidate to trade any potential Aussie weakness in the near future.

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Although the Australian Dollar lost value against all currency pairs which we have reviewed in today’s and yesterday’s post, there are certainly ajor differences between the individual currency pairs. The AUDUSD (check here) and the AUDCAD seem the best setup for bearish trades. The EURAUD (check here) and AUDNZD end for a tied second place and the AUDJPY seems the worst setup (most likely because the Yen has been losing ground against other pairs as well).

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Which Aussie pair do you find the most interesting?


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