Moving averages are extremely helpful tools in determining trend direction and intensity, but the longer averages significantly lag the market when a turn comes. Evaluating shorter term moving averages can be more useful in these situations.
USDJPY
A steep 2-day slide took prices down to 82.50 from 84.50, but prices bounced off the 10,20,30 EMA support bands. The averages are now arranged in proper bullish order, with the 10 on top, followed by the 20 and finally the 30. When using shorter-term bands, it is more important that the order be correct than if prices penetrate the averages. Following the pullback, expect a second leg to the rally, which may take us up to resistance near 86.
GBPUSD
The pound has pulled back to its moving averages after reversing arrangement, switching from bullish to bearish direction. The first pullback after a change in direction often offers an excellent opportunity to go short, with minimal risk.
AUDUSD
It is difficult to determine the trend status of the Australian dollar. Prices have pulled back after a 2 week decline, but the moving averages are completely tangled, indicating a lack of trend. This quick visual cue warns us to wait for further clues rather than guessing the direction.
Written by bforex.com
