Become an expert in the Australian dollar

Become an expert in the Australian dollar

As the London forex session starts, Anna explains how to become an expert in one currency, and here she focuses on the Australian dollar.

00:00

Introduction and trading disclaimer

00:00

The webinar begins promptly with a welcome and an overview of the session’s focus on the forex market—past trends, current status, and future expectations. The presenter highlights the importance of the trading disclaimer, emphasizing the risks of trading and advising participants to never trade with money they cannot afford to lose. The audience is diverse, including Forex program students, users of quantum trading indicators, and readers of related trading methodology books.

01:07

Overview of volume price analysis methodology

01:07

The methodology discussed is Volume Price Analysis (VPA), a trading approach combining price action and volume analysis that has been developed over the past 20 years. It incorporates candle patterns, support and resistance, and the concept of time to provide insights not only on past and current price movements but also on likely future directions. Additionally, this approach emphasizes the importance of understanding fundamentals and related markets, recognizing that markets are interconnected. Traders begin analyzing from charts and typically start with a single timeframe, eventually progressing to multiple timeframes for a comprehensive view.

02:42

Cross market and fundamental analysis importance

02:42

The discussion begins by emphasizing the importance of fundamentals and cross-market analysis, highlighting how events in one market can influence others, especially in currency pairs. The Canadian dollar and its close correlation with the oil market is used as an example, noting Canada’s status as a major oil exporter. Specific tools and indicators have been developed to better understand currency flows and market movements, offering traders a head start in analyzing currency dynamics.

03:52

The speaker stresses the importance of thoroughly researching currency pairs as one would with stocks, including understanding the background and market environment. Timing within market cycles, such as earnings seasons and monthly or weekly patterns, can significantly impact price action. This principle applies equally to currencies and stocks. Examples include the Australian dollar, Euro, and Canadian dollar, demonstrating how volume and price analysis techniques are universally relevant across markets and timeframes.

05:49

The session includes coordination between presenters to analyze different currency pairs, such as the Australian dollar and Canadian dollar. Viewers are encouraged to ask questions via chat, with short queries answered promptly and longer ones addressed live. The segment concludes with a focus on the Australian dollar for a specific reason, setting up the next part of the discussion.

06:26

Focus on Australian dollar fundamentals

06:26

The Australian dollar (Aussie) is a strong currency to trade, both against the US dollar and other pairs. It is tied closely to Australia’s stable economy, which has not experienced a technical recession since 1991 and was largely unaffected by the 2008 financial crisis. The recent interest rate decision maintained the rate at 0.25%, highlighting the stability and importance of the Australian economy. The Aussie is considered a Tier one currency and is heavily influenced by economic fundamentals, especially the relationship with China.

08:13

The Australian economy depends significantly on exports, particularly minerals and raw materials, with China as its largest customer. Traders are advised to use resources like Trading Economics to understand the economic background affecting the Aussie. Monitoring the economic calendar is crucial to filter important news impacting this currency, especially during weeks with key events such as the Reserve Bank of Australia’s (RBA) cash rate decisions and policy statements. The Aussie is active throughout the 24-hour trading cycle, often moving during the US session against the US dollar, making it a versatile currency for trading.

09:51

Australian dollar trading characteristics and cycles

09:51

The discussion focuses on trading currency pairs involving the Australian dollar (Aussie), particularly the Euro/Aussie and Pound/Aussie pairs. The speaker advises maintaining a trading diary or spreadsheet to track market moves and factors influencing those moves. The Aussie has been rising partly due to the Reserve Bank of Australia (RBA) holding interest rates steady and improving market sentiment, as reflected by positive S&P 500 futures. Australia’s stable approach to bond buying and its effective handling of the health crisis contribute to the Aussie’s strength.

12:01

The Aussie dollar remains attractive due to Australia’s successful management of the health crisis and China’s economic recovery boosting exports. Market optimism supports buying the Aussie. However, in cross currency pairs involving the Aussie, it is crucial to identify which currency is driving price movements at any time. For example, recent price action in the Euro/Aussie pair demonstrates how the counterpart currency may influence trading dynamics more than the Aussie itself.

13:07

Euro-Aussie pair technical and fundamental review

13:07

The speaker discusses the volatility caused by the pandemic followed by a steady downtrend in cross currency pairs, particularly in higher time frames, which facilitates easier trading in faster time frames. There was some consolidation around the volume point of control with reasonably widespread candles that produced viable trades. The market experienced narrow spread days where sitting out was preferable, followed by a break lower that was favorable for short positions on longer time frames. A reversal occurred, influenced by the European Central Bank (ECB) announcements, highlighting the importance of monitoring both individual currencies and their counterparts alongside news cycles and economic releases.

14:10

Analyzing the currency pair movements, the speaker explains that despite no technical reason for a drop, the market reacted to the ECB’s decision where Christine Lagarde’s lack of commitment to further quantitative easing caused a bullish engulfing candle and a strong reversal. The market interpreted that economic responsibility would fall on individual EU countries rather than the ECB intervening. This led to a follow-through in buying on Friday, though with slightly reduced volume, and a subsequent return to the volume point of control.

15:14

Price action showed a primary downtrend interrupted by a congestion phase and a secondary trend, but no clear reversal from a primary downtrend to an uptrend. The speaker shifts focus to faster time frames, using hourly charts to gain an overall picture of the Euro-Aussie pair. This analysis reveals ongoing movements and divergences in various currency pairs, which help anticipate potential market directions.

16:29

Examining individual currencies within pairs, the Aussie dollar is rising while the yen and Euro are moving lower. The speaker notes strong movements and divergences in currency lines, indicating active price action. The Euro-Aussie pair in particular shows clear directional movement, which is central to the speaker’s current trading focus.

16:59

Currency strength analysis and potential reversals

16:59

The speaker discusses the concept of exhaustion levels in currency markets, emphasizing that the 80 and 20 lines are not strict limits for reversals. They introduce the matrix indicator, which ranks currencies by relative strength and weakness, noting the euro’s position shifting from a low point to a higher rank, while Euro-Canadian has taken the bottom spot. The key question posed is whether the current chart signals a reversal or continuation of the trend, with the hourly chart serving as a benchmark to assess slower timeframe trends.

18:17

The importance of different timeframes in trading decisions is explored, highlighting that traders must choose between following trends on higher timeframes or taking counter-trend trades on faster charts. The speaker notes that timeframes rarely align perfectly, so trading always involves either being with the trend or counter-trend. An example involving the Australian dollar (Aussie) is introduced as a practical illustration of these concepts using the matrix indicator.

19:23

Focusing on relevant currency pairs is crucial to avoid distraction and buyer’s remorse from missing better moves elsewhere. The speaker shares an example from the previous day where the Aussie dollar was rising while the pound was selling off. They explain how the indicator helped identify these moves on the hourly chart, and further detail how divergence appeared on the 12-minute chart leading to a favorable trading opportunity around the London market open.

20:28

The speaker discusses using the array indicator on a 15-minute timeframe alongside the hourly matrix to analyze Aussie dollar pairs, isolating the Aussie to understand money flow and trend momentum. They observe that the Aussie is currently strong against the euro and supported against the Swiss franc, with the Aussie yen rising in line with positive market sentiment linked to the S&P 500. Other pairs like Aussie-New Zealand, Aussie dollar, CAD, and pound are noted as less decisive but potentially poised for divergence signals.

22:04

Trading indicators and momentum monitoring

22:04

The speaker analyzes the euro-Aussie currency pair using different charts, including daily, three-minute, and Renko charts. They observe a recent down move followed by some congestion and a minor reversal, noting volatility due to the London session’s volume influx. The hourly chart shows an overextended condition, suggesting possible reversals or continuation of the downtrend. The segment sets the stage for examining key trading levels and volume behavior.

23:11

The discussion shifts to the importance of using indicators selectively in trading. Indicators serve distinct roles such as identifying entry setups, confirming patterns, and monitoring price action to determine exit points. The speaker introduces Camarillo levels on the 15-minute and three-minute charts to identify consolidation phases for the euro-Aussie pair. The use of the CSI indicator helps confirm the consolidation through the absence of divergence.

24:25

Expanding the analysis, the speaker compares the euro and the British pound against other currencies, highlighting the pound’s strong rise. They note that both currencies are moving in a similar direction, indicating no major divergence yet. Key support and resistance levels, specifically the S4 to the downside and S3 and S2 to the upside, are identified as critical points to watch for potential price movements during the London session.

25:26

The speaker continues monitoring the euro-Aussie using Renko charts and introduces a momentum indicator from the NinjaTrader platform, which calculates tick data to assess market momentum. The indicator shows a surge in activity at the London open followed by a decline. Volume under the current candle appears insufficient to justify a strong move. The segment concludes with the intention to watch for either a reversal or continuation in line with hourly chart signals using matrix and CSI indicators.

By Anna Coulling – creator of volume price analysis