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Australian Dollar Breaks Multi-Month Triangle Pattern

The march of the USD continues higher, while commodity currencies continue to sink. The Australian Dollar Futures (6A) broke below a multi-month triangle pattern on January 6. The breakout occurred at 0.7075 on the March 2016 contract. With fellow commodity currency the Canadian dollar hitting new lows on January 6, bears may want to take note of this triangle pattern. 

The triangle, which began in September is 0.045 (rounded) at its widest point. Subtracted from the breakout price, that gives a target of 0.6625. This is in alignment with the long-term downtrend that indicates the price will make lower highs and lower lows. The low on the March contract is 0.685, set on September 4.

Figure 1. Australian Dollar Futures, Continuous Daily Chart

Triangles aren't a precise science. The price can breakout out, as it has, but then move back into the triangle.  This is called a false breakout. The overall trend and outlook remains bearish (down) as long as the price stays below, or even inside, the triangle. Triangle resistance is 0.7302 to 0.7348; it takes a move above resistance to indicate the price is potentially turning around.

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