Triangle Pattern to Watch in AUD/USD Daily Chart

12/05/2008 10:26 am EST

Focus: FOREX

Chart
(Price on 1st pane, Slow Stochastics on 2nd pane; uptrend line in green; horizontal support/resistance levels in yellow; chart pattern in magenta; 50-period simple moving average in light blue.)

Much like the consolidations that have been prevailing in other currency pairs lately, the AUD/USD (a daily chart of which is shown) has been forming a large symmetrical triangle pattern. Currently, price is around the approximate vertical middle of the triangle, unable to choose decisively in which direction to go.

To the immediate upside within this triangle, 0.6600 is a clear short-term resistance level, a clean break of which could mean an eventual up move and break above the top border of the triangle. In this event, there is potential for a subsequent reversal of the prevailing downtrend. There is, however, somewhat of a greater technical bias to an eventual move towards the bottom border of the triangle and a possible bearish break of the pattern. In this event, the triangle will have shown signs of it being a continuation pattern.

Of course, a major downtrend continuation would only be confirmed on a break below the 0.6000 zone, which represents the recent 5+ year low in the pair.

By James Chen, Chief Technical Analyst, FX Solutions

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