All eyes on the Aussie dollar following the overnight RBA statement

All eyes on the Aussie dollar following the overnight RBA statement

As the London forex session gets underway it’s all eyes on the Aussie dollar following the RBA statement and rate decision, and across the Aussie complex, with a nice move lower developing on the AUD/USD.

00:12

Introduction to currency matrix and indicators

00:12

The discussion begins by revisiting insights related to the Australian dollar (Aussie) and the cable (GBP/USD) currency pairs, with a focus on recent developments involving the pound and Aussie. Attention is drawn to a currency matrix indicator, explaining that higher values on this indicator suggest strong and favorable moves in currency pairs. Despite notable market movements, the hourly chart for the pound shows relatively low indicator values, which is a key observation in assessing the strength of these moves.

01:32

Upgrading indicator with average value system

01:32

The speaker discusses plans to upgrade a system by adding indicators that classify extreme values as average, below average, or above average for a given time frame. Additionally, there is interest in comparing values at the extremes, exemplified by the pound and Aussie currencies, as referenced during the earlier discussion.

02:08

Analyzing pound Aussie and Aussie dollar moves

02:08

The segment explains how currency movements are determined by analyzing the strength and weakness of pairs involving the Australian dollar and the British pound. It highlights that the matrix used shows strong buying of the pound and selling of the Aussie dollar, with the Aussie showing significant weakness especially against the US dollar. The matrix not only identifies which pairs are moving strongly but also reveals the underlying drivers by comparing values of pairs sharing a common currency.

03:26

Commodity currencies and market sentiment impact

03:26

The discussion focuses on currency movements, particularly the strong moves in commodity currencies like the New Zealand dollar and the Australian dollar. Despite some movement in the British pound (cable), the most significant changes have been in these commodity-linked currencies. This shift is linked to market sentiment, which has soured as reflected by the Nasdaq’s 45-point decline. The decline in the Nasdaq has influenced heavy selling in the Aussie and New Zealand dollars, highlighting their sensitivity to market sentiment.

04:30

Aussie dollar chart and volume point control

04:30

The speaker discusses a significant market move affecting sentiment, focusing on the Australian dollar (Aussie) using a 10-minute chart along with other timeframes for context. They highlight a strong downward move in the Aussie tied to a retest of the volume point of control at 69.75, followed by some basing around 69.35. The speaker also explains isolating individual currencies and currency pairs using the CSI indicator, which helps analyze market movements in detail.

05:47

The speaker reviews currency pairs on their workspace, noting that the Aussie and British pound (Pound) had been moving similarly but now show divergence, with some buying interest emerging in the pound. The pound hit strong resistance on the hourly chart, and the speaker questions whether enough volume has accumulated to break this resistance. They observe a shift in sentiment for both the British pound and the Aussie dollar. The discussion introduces the concept of using indicators and charts to identify reversal zones and emphasizes the importance of personal judgment when interpreting this information.

07:04

Overextension and potential reversal setup

07:04

The discussion focuses on observing overextensions in currency pairs, specifically the US dollar and the Australian dollar. The market shows strong moves that often revert to the mean, creating sinusoidal patterns. Traders watch for potential reversals indicated by charts and indicators. The speaker prefers trading during congestion phases and breakaways rather than reversals, while another trader, David, favors trading outright reversals when overextensions occur.

08:13

Reversal trading requires careful consideration of stop-loss placement, which must be wider due to the risk of the market moving further against the expected reversal before turning. Multiple factors impact stop-loss management. Volume analysis is also important to confirm the strength of a potential reversal. The speaker emphasizes the complexity and caution needed when trading reversals.

08:50

Breakaway trading strategy and stop-loss placement

08:50

The speaker discusses breakaway trading, emphasizing the importance of analyzing candle patterns and setting wider stop-losses around volume points of control, which represent fair value areas where the market is balanced. Market orders drive prices toward limit orders, often manipulated by insiders to move the market to desired levels. The volume point of control serves as a strategic place for stop-loss placement, reflecting where the market is likely to find equilibrium.

10:31

Using the Australian dollar chart, the speaker highlights strong resistance levels above the volume point of control, suggesting these as logical stop-loss placements that allow for tighter stops. They address concerns about fake breakouts by recommending volume profile analysis combined with tools like the Camarillo indicator to better assess the likelihood of true breakouts. If the price congests around resistance, traders can decide to exit, demonstrating a disciplined approach to breakaway trading.

12:15

The speaker explains that while their personal preference is to use volume points of control for breakaway trading, traders should choose methods that suit their style as no single approach is universally correct. They acknowledge that breakaway trading can result in many small losses, but the significant moves can be substantial and profitable. Volume under candles confirms trends, and the example shows a confirmed break from the volume point of control signaling a primary downward trend.

13:22

Trend analysis with volume and candle patterns

13:22

The segment analyzes recent market candle activity, noting rising volume under certain candles and buyer interest, but also highlighting weak volume on a key candle suggesting a potential reversal. Despite some upward momentum and widespread rising volume, the market shows signs of indecision, particularly around the London open, where volume increases but price movement stalls.

14:28

The discussion continues with observations of sideways market movement and volume indicating indecision, followed by a drop to a support level around 69.35. The speaker notes that although the Commodity Selection Index (CSI) signals an extreme that could suggest a reversal, confirmation requires waiting and cross-referencing with other charts and indicators, as shown on the hourly chart.

15:33

On the hourly chart, the market remains bearish despite a possible short-term reversal seen on the 10-minute chart, as support levels are not very strong. The speaker stresses the importance of analyzing multiple timeframes—3 minutes, 10 minutes, and hourly—to understand price action fully. Scalpers using shorter timeframes might find the 10-minute reversal tradable, but individual adaptation of volume price analysis tools is crucial.

16:43

The presenter transitions the discussion to David, acknowledging the underutilization of the currency heat map indicator, which is a powerful tool for analysis and deserves more attention in trading strategies.

By Anna Coulling – creator of volume price analysis