Over the last several weeks, the Australian dollar has been able to capitalize on the poor economic situation in the United States and make substantial gains against the USD. Since the beginning of the month, the AUD/USD pair has moved up some 400 pips.
Forexyard traders will be interested to know that the pair may be due for a downward correction. Technical data indicates the cross is currently in overbought territory, meaning bearish movement is likely.
We will be looking at the 8-hour chart for AUD/USD, provided by Forexyard. The technical indicators being used are the Williams Percent Range, Stochastic Slow, and Relative Strength Index.
1. Typically when the Williams Percent Range is over -20, it is a clear indication that the instrument is overbought. Here, we can see the indicator is right around the -5 level, meaning a downward correction may take place.
2. Traders will want to keep a close eye on the Stochastic Slow, as it is currently showing the pair approaching the overbought region. Should the two lines intersect above the 80 level, it can be taken as a clear signal of impending bearish pressure.
3. Finally, the Relative Strength Index is currently right around the 75 level. Anything above 70 is usually taken as a sign that the pair could experience downward movement. Now may be a great time for traders to enter into sell positions at a great entry price, in order to capitalize on the coming trend.
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Dan Eduard is a Market Strategist with ForexYard. His addition to the ForexYard team has brought a unique new perspective to our clients. Dan's ability to compare and contrast trans-national issues with events in the market is uncanny and many clients so far have used his advice to make leaps and bounds in their trading strategies. He has been published on the ForexYard Trading Blog and affiliate websites. He carries a BA in Political Science and an MA in History.
