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I’m going to begin the day today on the Australian Dollar versus the US Dollar [AUDUSD]. Starting on the Daily Chart, on the left-hand side, we could see that this currency pair was in a downtrend. We started all the way up here into the mid-0.9700s, falling down into the mid-0.8600s. Within that downtrend, I’ve placed a black trend line to represent that downtrend connected with the highest high and the high right here just before the lowest low.
And we can see, within that downtrend, we had lower highs and lower lows. Well, recently we’ve seen a change of that pattern, where we saw the market find the low and start working its way higher, creating higher highs and higher lows and eventually breaking out above the black trend line. So, since then, we’ve gone into a bit of a range or congestion. We saw it rising above the black trend line, but then basically, since right here, about February 10, February 11, we got above this yellow-shaded area and we’ve been holding in this area of congestion. We’ve just been bouncing around in here for quite a while now, since February 11th.
The yellow-shaded area going between the 0.8960-level and the 0.8995-level. That’s our yellow-shaded area and that is holding right now as our support, or the bottom of the congestion or bottom of the range, however you want to define it. Then the pink-shaded area goes between 0.9055 and 0.9080 we’ll call it. That’s the pink-shaded area. Follow that pink-shaded area back in time. Importantly, back here on January 13th, this was our last resistance high. So, we could see that resistance high here is helping us identify our current resistance high.
And then you bring that all the way back here to the left and you could see some historical support. So, we see support, resistance, now offering resistance for the current congestion or range, and we’re bouncing around in there for the past several days. The yellow-shaded area. Follow it back in time. Not only do we see our current support there. We see historical support on the far left-hand side, back in December and then resistance in this timeframe, here in December and January.
Also, taking Fibonacci from the highest high down to the lowest low of the previous downtrend, we find the .382 Fibonacci retracement level sits right at the 0.9080-level. That’s the top of the pink-shaded area. All that to tell you that we are in congestion and, at this point, our best opportunitieses will be, first off, trading inside this range or congestion, but then eventually we will see a breakout to the top side to go higher or to the bottom side to go back down.
One last thing before we go down to the smaller compression. I’ve taken this red trend line and placed it along the supports on the left-hand side, the resistance here in the middle, and now the supports on the right-hand side. If this pattern continues to play out and we see the break above the pink zone, it could be confirmation of a change in the direction of the trend. I’m looking at this somewhat like an inverted head and shoulders, where we see the left shoulder on the left side of the red trend line, the head at the bottom of the chart, and then the right shoulder establishing on the right-hand side. So, inverted head and shoulders. A breakout above the pink-shaded area, of course above the 0.9080-level will confirm the continuation higher. Anything underneath there, we’ll look for it to go back down again.
So let’s go ahead and take all of that information back down here to the 4-Hour Chart and here is our congestion zone, our range right now that we’re following along. There’s that red trend line also connecting with several lows along here within this period of congestion. We actually see rising lows along here. We do see some contraction where the highs are getting lower and the lows are getting higher, so eventually we will look for a breakout of this congestion. Right now we are seeing support into the yellow-shaded area, and we have for the past several hours. Again, this is the 4-Hour Chart. The past several hours have found support here, having a difficult time breaking through this yellow zone and staying above these last support lows.
Pink-shaded area. We haven’t seen it over the past few days, but that is our last resistance high that we see up there into the pink zone. We haven’t seen it challenged over the past few days, but that would be the most important resistance high that we could see right now for the AUDUSD. And of course a break above the pink zone, we look for the continuation of the longer-term uptrend that we’ve been seeing since making the lowest low on the Daily Chart.
Now, here’s the important part. If it breaks underneath these last support lows here, if it breaks underneath our yellow zone and breaks underneath this red trend line, we’ll likely expect it to continue to pressure lower in the direction of the previous downtrend. Now, of course the green zone becomes potential support. The blue zone is potential support. So, actually let’s put a couple more arrows here. The blue zone is potential support. We do see some Fibonacci in that blue-shaded area also. Green zone has some Fibonacci in there also, and that happens to match up with historical support.
Let me zoom out one time. You could see the support on the left-hand side of the chart and resistance right here where that red trend line comes into play. So that’s that green zone. So, these offer potential support also. I’ve taken Fibonacci from the lowest low to the current high. Doing that, we find the .236 fib at 0.8980. That’s where the current market is. We also have the .382 fib overlapping with another fib from the previous downtrend right here in the blue zone. We have the 50% of this uptrend right here into the green zone. .618 is a little bit lower into this purple-shaded area that doesn’t connect all the way across.
Let me go ahead and drag that over there. There’s the .618 fib down there. So, all of those offer potential support. I think there’s much more support right now than there is resistance. Really we only have this one resistance here and all of these support. So, many opportunities for support and buying the direction of the momentum we’ve seen over the past several days. We do see some contraction. A breakout of that. You might even begin looking at this somewhat as a triangle pattern. If you put this top red line here and the bottom red line, we could see somewhat of a triangle pattern. A break of that triangle will give you a clue to continuation.
One last thing here on the 4-Hour Chart. The Forex Black Book is green. It’s been representing a bullish bias for the past several weeks. We go all the way back again into January, where we saw it turn green. It’s been moving up within that bullish bias. We recently see a couple of green arrows as it’s made dips into support. The trend bar today has turned bright green once again. So, any new green arrow on a dip into support gives you a buying opportunity. It could be here into the yellow-shaded area. It could be into the red trend line. May even possibly be down as deep as the blue-shaded area, but for the day today, I’m concentrating on support, looking for a challenge back into the pink-shaded area as resistance. And of course a break of that resistance, we look for a continuation of the uptrend. All of that is invalidated on a breakdown underneath our last supports here and a continuation lower for the AUDUSD today.
