[B]“INDICATOR OF THE DAY” - AVERAGE TRUE RANGE (ATR)[/B]
We often use [B]“Average True Range”[/B] (ATR) in our daily analysis and place the indicator at the top of our list as an invaluable technical tool that provides compelling insights into market price action and potential reversals. The concept of the ATR is simple. The indicator calculates what the daily average true range of a specific security will be based on a calculated average of the previous daily ranges.
As applied to [B]Aud/Usd[/B] today, we can see that the market had established a low by 0.8000 early on and has since been rallying. If we were to utilize ATR as a means of projecting/forecasting where the daily high could be today, we would simply take the daily ATR of 170 pips and add it to the current daily low of 0.8000 to give us a projected high of 0.8170. We will also look for other key levels that coincide by the projected ATR to provide a solid technical confluence for a compelling counter-trend trade set-up. Today, the other indicator is the 78.6% Fibonacci retracement off of the 0.8265-0.7825 move, which directly coincides with the projected ATR high at 0.8170. As such, we have recommended selling on approach to 0.8170 on Wednesday.
[B]Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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Joel Kruger publishes 6 daily pieces:
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[I][B]“Indicator of the Day”[/B] – [/I][I]A Feature Report that Highlights our Most Significant Technical Indicator of the Day. [/I]
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[I][B]“Midday Snapshot” [/B]– A Midday Fundamental Update, along with Technical Analysis of Selected Rates. [/I]
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[I][B]“Daily Classical”[/B] – A Daily Technical Overview of the Major Currencies. [/I]
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