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I’m going to get started today on the Australian Dollar versus the US Dollar [AUDUSD]. Starting here on the Daily Chart, we go all the way back to the left-hand side of the chart. We’re looking back into the end of January of this year. We began an uptrend that started down here, just into the mid to upper-0.8600s, began the climb, and pushed all the way to the top of the chart, into the mid-0.9400s.
The mid-0.9400s. This was into early April, and then, since early April, making that high, we’ve seen it go into a period of congestion or just hesitation really within the uptrend. If it’s an uptrend, we would expect to see higher lows, which is what we see along the blue trend line, but we would also expect to see higher highs. And really, this high back here in April, April 10, is higher than the current high, here, just a few days ago. So, we do see a little bit of hesitation in the uptrend. Not a continuation because we have actually a new lower high rather than a higher high.
I’ve represented that lower high with a black trend line. I don’t think that’s too important right now, but definitely could become important if we start to see a break lower for the AUDUSD. Right now, this week, we really haven’t seen a lot out of the AUDUSD. Here we are into the week, Friday, and since the beginning of the week, we’ve just been bouncing around between the green-shaded area, somewhere right around the 0.9388, 0.9390-level, and the pink-shaded area, which is right around the 0.9340-level. So, we’ve seen about a 45 to 50-pip zone of congestion between the pink-shaded area and he green-shaded area all week long, since last week.
And really, what we’d like to see would be a breakout. In the direction of the trend of course, what we’re looking for would be a breakout of the green-shaded area. A break above the 0.9425, 0.9430-level, above the green zone, we begin looking for return of the uptrend and a new high to be made. It doesn’t have to happen that way. We could see a change of the trend. So, the other breakout that we would look for would be a break underneath the blue trend line, the pink-shaded area, which has been support all week long, and we’ll call it 0.9320. If it gets underneath 0.9320, which is the pink-shaded area, we look for a change and turn back down to the next support, which would be the yellow-shaded area, and we can easily see it found support for multiple days here along that zone, right into the 0.9250-level.
So, we really need to see this week, or today I guess – it’s the end of the week. Today, or even going into next week, a breakout of this congestion, a breakout of this little, tiny range that we see here between the pink and the green-shaded area. Now, until then, there is the potential, and I’m sure there’s folks been all week long trading inside this range, inside this congestion. My suggestion, since the beginning of the week, was if you were going to sell it, you would sell it into the green-shaded area because that became your lowest risk, highest reward opportunity to sell it. And if you were going to buy it in the direction of the longer-term trend, you’d want to buy it as close as possible to the pink-shaded area and the blue trend line for the AUDUSD.
Now, over this week, we’ve seen the trend bar for the Forex Black Book turn red, which gives you a little bearish bias, but I’m not really concerned with that right now because I want to see a change in the trending pattern before I’m really concerned with that red trend bias. I want to see it start to create lower highs and lower lows. Then I’ll concern myself with the red trend bias, because really we are still within the parameters of the uptrend. We still see higher lows along the blue trend line, and really, unless it breaks this low here in the yellow-shaded area, I think we’re still within the confides of the uptrend.
So, I’m still focused on the buy side. Buys on dips to the pink zone, maybe even the yellow zone become an opportunity, or even a breakout above the green zone. Those would be the areas to focus in on. Any short-term sells that get taken here into the green-shaded area should be protected as quickly as possible because you have to remember you’re trading against the overall trend.
So let’s go ahead and take this down to the 4-Hour Chart. Now, there have been some opportunities this week to trade with the Forex Black Book. You see multiple red arrows here, but as I’ve been talking about in the Trade Room all week long that you really don’t want to take a sell, even with the red arrows and red trend bar unless you’re into resistance. Buy low, sell high. Selling as it approaches the pink-shaded area, as it did here, you take a look at our last red arrow. This one right here. That arrow popped up right as it was touching our area of support – the pink-shaded area -, so you really didn’t want to take a sell there.
Now, if that red arrow had popped up and it was up here towards the green zone, or if that red arrow popped up and it was underneath the pink zone, then that might’ve been a different story, but selling on top of support was just not the very best opportunity. Now, go back a couple of days ago and you could see this red arrow up here next to the green-shaded area. Now, there’s a different scenario where you could’ve gotten into a sell here, all the way up next to the green-shaded area, the resistance into the 0.9375, 0.9380-level, and you saw a fall that went down about 45 to 50 pips. So, there’s the difference in the scenarios.
The last two red arrows with the Forex Black Book. Your scenarios are you want to sell into resistance as close as possible to the green zone. You don’t want to sell when it’s down there next to the pink-shaded area. So, if you’re looking for a new sell today for the AUDUSD, I would suspect that you’re looking for it to come all the way back up here. Let me see if I can get this arrow selected. All the way back up here to the green zone before you have a safer opportunity to sell this currency pair, keeping in mind your risk in that scenario is that it breaks out under the green zone and continues the longer-term direction of the overall trend.
Back down here, if you’re looking to buy it, that would be the pink zone. A breakout under the pink zone is the risk and it goes back down again. One last thing here on the 4-Hour Chart. Let’s take Fibonacci from the low that we see right here at the very bottom of the chart to our current resistance high. We can see that yesterday the market came to a stall right here at the .382 Fibonacci retracement level that sat at 0.9325, and that’s the top of that pink-shaded area. So, Fibonacci holding support. A break there would continue lower, but held support, turning back in the direction of the longer-term trend, I suspect a dip to the pink zone is your best opportunity to buy it. Challenge of the green zone, resistance may be a clue to sell it, but keep aware that your risk in any sells would be the break of the green zone and the continuation of the longer-term trend for the AUDUSD today.
