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Transcript of Video
I’m going to get started today on the Australian Dollar versus the US Dollar [AUDUSD]. Starting here on the Daily Chart, it’s not too hard to see that this currency pair has been in a downtrend for quite some time. We’ve seen strength in the US dollar, weakness in the Australian dollar as it’s continued to pressure back down into new lows that we haven’t seen in multiple years.
First off, starting at the top of the trend, back here into the beginning of September, we capped out right around the 0.9400-level. Then it began a pretty strong month of September, falling from that 0.9400-level, all the way back down here into the 0.8700-level. And then for a period of time, we went into consolidation, congestion, going sideways here for a period of time. Then about here in mid-November, we saw the beginnings of a second leg of the downtrend.
It started moving down, moving from the upper-0.8700s, all the way down here towards 0.8100. So, that second leg pressuring pretty low and into those multi-year lows that we’ve seen here for the AUDUSD. Looking down here at the bottom, over the past few days, we have found support just above 0.8100. It’s had a very difficult time breaking through there. But if we can get through there, and as we’ve studied in the Trade Room over the past few days. If we can get through this 0.8100-level, the yellow-shaded area at the bottom, we could look for a significant drop for the AUDUSD into the next areas of support, and we’ll look at that later on in the Trade Room today.
Now, we haven’t really seen any evidence or clues to reversal here for this pair. You know, down here at the bottom of the trend, you might think that there’s a probability – pretty good probability – of some pullback, retracement, or reversal for this pair, but there’s no real evidence or clues to that yet. What I mean by that is we don’t see any candlestick formations. We don’t see a hammer candlestick or an engulfing candle yet that implies the buyers are taking back control of this pair.
We don’t see any patterns. We know head and shoulders pattern. Any kind of reversal. No double bottom or such that gives us a clue to reversal. We haven’t even broken back above the shorter, blue trend line right there. So, all the evidence still points to the downtrend and that the buyers have had a very difficult time taking any sort of control for this currency pair over the past few days. Even the Forex Black Book remains red and still gives us a hint to the bias to the downside for this pair.
So, all that pointing me to the fact that I would be cautiously, because we are at the bottom of the trend, but cautiously looking for still sells in the direction of the trend. So, what I want to do is look for resistance and the resistance levels offer lower risk and higher reward opportunities to sell in the direction of the trend until we see a change of the trending pattern, which again would be higher highs and higher lows.
Let’s go ahead and take this on down to the 4-Hour Chart. We can see this orange-shaded area. Just a little, small, orange strip of shaded area just above the yellow zone. 0.8187 to 0.8210 or so is our current resistance. You can see that over the past few days. You could maybe even draw a small triangle pattern here if you wanted to. Let’s just use the triangle tool here. We could even probably draw a small triangle pattern if you wanted to somewhere in here to show you that we see that congestion, that contraction in the market.
So, as long as it holds that type of pattern, the expectation is that you’re looking for resistance at the top, which would be close to the 0.8187-level, the blue trend line, which is the longer-term trend line. All that becomes a possibility if and only if it breaks back above there. You expect some reversal for this pair, likely taking it back up to the pink-shaded area. But if you’re keeping in the mindset of trading the trend, the closer you get to 0.8185, 0.8200 becomes a selling opportunity for the AUDUSD.
Again, no real reason to buy this yet. I guess the only reason to buy it at this point would be a break of this pattern. A push above 0.8200, 0.8210, and then you maybe look for intraday buys as it goes back up towards the 0.8280, 0.8300-level, but still trading the trend as long as it stays within this triangle pattern. The next thing we’ll be looking for in the direction of the trend is a final breakdown of that low. We’re looking right around 0.8115 as our low right now, but getting through 0.8115 and probably primarily the 0.8100-level, we’ll look for those new targets lower. And again, like I said, we’ll look at that later on in the Trade Room.
For the Forex Black Book traders, anybody using that indicator, it is a red trend bar down at the very bottom. You’re looking for a new sell signal, would be a downward-facing yellow or red arrow. I don’t think we’re going to get one truthfully. I don’t think it’s been going sideways long enough. I don’t think it went up enough to see any momentum shift to go back down. So, I don’t think we’re going to get one, so that’s not probably an opportunity for the day today, but I do think the opportunity still persists here at 0.8185 or so, or anywhere between that and 0.8210. That we’re looking for sells with a fairly minimal risk.
The risk in any sells that you take right now would be above 0.8210, above the orange-shaded area. So, you’re setting your stop loss somewhere. 0.8220, 0.8225, maybe 0.8230, depending on how much room you want to give the market to breathe, but not too far above that orange zone because you know that if it breaks above there, it’s likely going to continue to pressure higher. So, at the current time, we’re selling this rally into resistance, into the 0.8180, 0.8200-level, looking for the fall back down to 0.8115, the bottom of the yellow zone and a continuation lower for this pair.
One last thing I’m going to do here, and this won’t change it at all. It’ll just give you something else to look at. We could take a shorter-term trend line just about right here. This red trend line, and that’s really just giving you another hint or clue to the topside of that triangle pattern and that we’re looking at resistance highs along there. Just a shorter-term trend line there. We could also take Fibonacci from that same high, where the red trend line starts, down to the lowest low that we see here on the chart. .236 fib sits right around 0.8177. That’s right there close to the top of the yellow zone, underneath the orange zone and the red trend line.
.382. 0.8215. So, anything, if you’re placing stop loss, you probably put your stop loss above 0.8215 and that .382 Fibonacci retracement level from that shorter trend for the AUDUSD today
A wonderful synopsis of the AUDUSD.
Thank you for the input Carol!
Ross