Trend reversals in Australian Dollar Trust ETF (FXA)

FXA Chart

FXA is a US based exchange-traded fund tracking the price in USD of the Australian dollar. On January 15 the ETF bottomed out and began a 3 month long rally. The decline in US dollar strength followed a natural five wave structure which was counted as complete on April 19. RSI showed weakening of the bullish trend throughout the entire second half of the advance. Eventually, price closed below the 0-4 line on April 27 and signaled that USD weakness is likely over. What followed was a continuous downslide in the ETF driving its value nearly 7% lower in a month's time. Keep in mind that waiting for the 0-4 line break assumes foregoing the opportunity to enter a position at the ultimate market top or bottom – most likely the wave 5 extreme. However, this line often acts as a trend barrier and once penetrated the probability that the preceding move has ended increases significantly. In the long run the savings from not betting against the ongoing trend will more than make up for the price "paid" to see a line break before entering a position.

The Guggenheim CurrencyShares Australian Dollar Trust (FXA) allows investors to take on exposure to the AUD/USD exchange rate. The fund increases in value when the Australian dollar strengthens and declines when the American dollar appreciates. ETFs are low-cost, flexible and tax efficient financial instruments offering exposure to the volatility of a specific asset, industry or country used by both small and large investors.

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