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I’m going to begin the day today on the Australian Dollar versus the US Dollar [AUDUSD]. Starting here, on the Daily Chart, on the left-hand side, we could clearly see that this currency pair was in a down trend. Falling from the 1.0500s all the way back down here into the 0.8800s at the bottom of the chart. Sitting bottoming out down here into the 0.8800s, we’ve seen a little bit of a rebound. It first came back up here into the 0.9200-level, bounced back down to the 0.8800s again, and now rallied all the way back up here in towards the 0.9500s.
Interesting here is that the 0.9500-level is also the .382 Fibonacci retracement level inside that yellow-shaded area right there of this previous down trend. We saw the market come to a complete stop there, into 0.9500, into that yellow-shaded area, a little bit of a dip back down here towards the 0.9300-level into this purple-shaded area, which historically had some resistance lined up in that purple-shaded area, and now a rebound coming back into that yellow-shaded area and towards the 0.9500-level again.
The question will be: what’s going to happen? Are we going to see a turnaround once again from 0.9500 and for this currency pair to go back down in the direction of the previous down trend, or are we finally going to see a breakout above 0.9500 and a continuation of the current momentum that we’ve seen for the AUDUSD.
Let’s take that information down to the 4-Hour Chart so we can get a little bit closer view of this currency pair. Now, over the past several weeks, we’ve seen that market bouncing around between the yellow-shaded area, again, at the top, into the 0.9500-level, where we most recently found resistance. And all the way back down here, again, into that purple-shaded area, we could see multiple times finding support into that purple-shaded area, and historically, that has shown evidence of being resistance also on the left-hand side, just to the left-hand side of the chart.
So, if we go back here and look at the 0.9500-level – the yellow-shaded area -, over the past few weeks, since this vertical dashed line, we’ve just been bouncing around. A period of indecision or consolidation between the blue-shaded area, which goes down here into the low-0.9400s and again that 0.9500-level and the yellow-shaded area. It would be my expectation that we’re going to look for a breakout in the direction of the current momentum.
The red trend lines – both red trend lines – the longer and the shorter representing upward price movement, or higher lows. By definition, an up trend has higher highs and higher lows. So, as long as we see higher lows, that’s the direction I want to focus my efforts on. If we start to see lower lows and it breaks underneath that red trend line and underneath that blue-shaded area, I might change my directional focus and begin looking for it to go back down towards the bottom of this range that we’ve highlighted between the yellow and the purple-shaded area.
So, for the day today, and maybe even going into tomorrow, we’ll have to see if we can get a breakout, I’ll be looking for support into the blue-shaded area just into the low-0.9400s. We’re looking at 0.9420 to 0.9445 – the blue-shaded area. Looking for support into the blue-shaded area, above the short-term trend line. As long as it stays above the 0.9420-level, there’s potential to find support and rally back towards the yellow-shaded area. If, at any time over the next few days, we see a breakdown underneath 0.9420 the blue-shaded area, and underneath that red trend line, we’ll likely look for a continuation back down into the 0.9300s and this green-shaded area, sitting down here towards the bottom of this triangle pattern.
The other side of it is the yellow-shaded area and the 0.9500-level. A breakout above that yellow-shaded area, I will expect a continuation of the up trend, but as we’ve seen over the past couple of weeks, as long as it stays underneath it, there’s potential for resistance and for this to bounce back down. I’ve also placed a blue trend line there to represent the lower highs. So, we see higher lows and lowers highs; a period of consolidation. We don’t really have a trending direction. An uptrend would be higher highs and higher lows.
So, what we need to see, if this is going to continue to be an up trend and a breakout in the direction of this previous trend movement, would be a breakout in the direction of this previous trend movement; would be a breakout above the yellow-shaded area. So, it would be my expectation, if I’m looking to buy this currency pair, there’s really two places to buy it. A dip back to the blue zone, back into the low-0.9400s, becomes a low-risk buying scenario because that dips into support. Buy low, sell high. A buy comes into a low point or into support. So, the blue-shaded area, the red trend line becomes an opportunity to buy it, which it already has done since the market opened for this currency pair.
The other time to buy this currency pair other than dipping back down to the blue-shaded area would be a breakout above the yellow-shaded area. An open and close above here. Now, I wouldn’t be buying it until it actually breaks out into or above that yellow-shaded area, because we can see history has shown resistance into here. So, as long as it stays within or under it, there’s still potential to find resistance like we did the last time. I’m looking for a breakout above the 0.9500-level to give me confidence it’s going to continue in that direction after breaking above it.
So, two places to buy it would be a dip to the blue zone or breakout above the yellow zone. Otherwise, two opportunities to sell this currency pair. If it’s going to stay in the consolidation that we’re in, the yellow-shaded area provides a fairly low-risk selling opportunity. Of course we do have a bank holiday in the US today, so that may affect this currency pair and the volume we see out of this currency pair today. Any currency pair that pairs with the USD could have low volume today because of the US bank holiday. But as we could see here, as long as it stays under the yellow-shaded area, as it has for the past two weeks or so, potential for resistance and a bounce back down to the blue zone. And of course, a break underneath the blue zone – just the opposite – would provide a breakout selling opportunity underneath the red trend line and underneath the 0.9420-level, selling to target all the way back down here into the 0.9300s.
Taking a quick look at the Forex Black Book, it is green, but it is the dark green, not the brighter green. So, any green arrows that we see could provide a buying opportunity in the bullish direction, but it would be the preference that this trend bar at the bottom turns the brighter green color, giving us an indication of the trends being in agreement. Right now the shorter and longer or faster and slower trends are in disagreement. That’s why it’s dark green. We need them to come into agreement. So, I think it’s probably going to take a breakout of this consolidation above the yellow-shaded area before we’d actually see that trend bar turn green. So, that’s exactly what I’m going to look for today for the AUDUSD.
