How to Use Moving Averages on AUD/USD Without Overcomplicating It

Moving averages can help you understand the direction in which the AUD/USD pair is moving. But there is no need to add too many lines to your chart or follow every signal. You just need to learn how the 50-day and 200-day moving averages can be used for spotting the trend and making better trading decisions.

Key Takeaways

• Moving averages make it easier to see the overall direction of AUD/USD.
• Forex traders commonly use the 50-day and 200-day moving averages.
• The moving averages can help you understand the current trend but don’t help predict where the price will go next.
• If you use moving averages with support and resistance levels, you will get a clearer picture.
• A good AUD to USD forecast should use moving averages as a guide rather than a signal to buy or sell. 

If you have been a forex trader for a while, you must have already used a moving average on your chart. You may also have added a few of them to find the right time to enter a trade. However, the signals that moving averages will give you might not always be clear. The price can move away from the line sometimes, while it may cross straight through it other times. This still doesn’t mean that the tool is useless.

What’s important is to understand what moving averages actually show. On the AUD/USD currency pair, you will find moving averages to be most useful for checking the overall trend, not for predicting the next price move.

What Does a Moving Average Show?

A moving average shows the average closing price of AUD/USD over a given period of time. You can see it as a line on your chart. Now, the average changes as new prices come in. This is what makes the line move along with the price, thereby helping remove some of the small ups and downs. 

For example, if you see that the moving average is going up, it means the average price has been rising over that period. On the other hand, if you see the line move down, understand that the average price has been falling. This is the main thing you need to know.

One common mistake a lot of traders make is to think that the price will always bounce when it reaches a moving average. But this isn’t entirely true. Sometimes the price does bounce, but other times, it may move straight through the line. This is exactly why you should treat it as a guide instead of a level that cannot be crossed by the price. 

Which Moving Averages Should You Use on AUD/USD?

You will find a lot of moving average settings. However, there is no need to use all of them. Using the 50-day and 200-day moving averages is enough, and they are actually the most widely followed ones. 

The 50-day Moving Average

This will show you the average closing price over the last 50 trading days. So, by using it, you will be able to understand the medium-term trend. 

If the AUD/USD pair trades above a rising 50-day moving average, it means that the price has been moving higher in general. Similarly, if it’s below a falling line, understand that the trend may be moving lower.

The 200-day Moving Average

This shows the average closing price over the last 200 trading days. It helps you understand the longer-term trend. Many traders watch this line to spot possible changes in market direction. However, it moves slowly, so it is not the best tool for finding an exact entry point.

Use Moving Averages to Understand the Trend

Before placing a trade, check where AUD/USD is trading in relation to both moving averages.

If the pair is above both lines and they are moving up, the trend looks positive. You can look for buying opportunities near support levels.

If the price is below both lines and they are moving down, the trend looks weak. You can look for selling opportunities near resistance levels.

If the price is between the two lines, the direction may not be clear. It is better to wait for more information. Also, check support and resistance levels and important economic news before making a decision.

Suppose you are preparing an AUD to USD forecast for the coming week. You notice that AUD/USD has been falling for two months and is trading below both moving averages.

If the price starts rising towards the 50-day line but struggles to move above it, the downward trend may continue. Instead of buying straight away, wait for a clearer signal.

Keep Your AUD/USD Chart Simple

You do not need too many indicators. Use the 50-day and 200-day moving averages on TradingView, along with support and resistance levels, to prepare a better AUD to USD forecast. Remember, moving averages show past price movements, not what will happen next.