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I’m going to get started today on the Australian Dollar versus the US Dollar [AUDUSD]. Today we have two trends that we’re going to take a look at. The longer-term uptrend that we could see on the left-hand side with the blue trend line and the shorter trend line. The red trend line coming down from the top.
First off, the longer-term uptrend started all the way back in January, down into the mid-0.8600s. Took a climb all the way up into the 0.9500-level, before it was capped by resistance. So, that’s the previous uptrend. So, it was going in that direction for quite some time. Now, if we begin to zoom it in a little bit, we could see a little bit of a change in that trending behavior, where we can see the market falling off of that resistance high, making a new lower high.
Remember an uptrend has higher highs and higher lows, so we can see that on the left-hand side. Higher highs and higher lows as it continued to pressure higher. A downtrend would have lower highs, which we can see along the red trend line, but we would also expect it to make a new lower low, which we, I don’t think, have seen yet.
First off, the red trend line. You see the highs getting lower. That’s the first component to a downtrend, but we also need to see a lower low. And this orange-shaded area here represents where our last two lows are. You could see them. And I’ve put a thicker blue trend line here inside that orange-shaded area, but I don’t really think you need that. I think you could easily just take something like these black X’s here and say there’s a low and here’s a low. There two lows where the black X’s are, and we have not seen. In fact, we’ve actually made a third low in the most recent days right here.
So, we see three times challenging that orange-shaded area and bouncing off of it, but we still see those falling highs. You might even interpret this as somewhat of a descending triangle pattern, where we have fairly steady or flat lows and falling highs. If that’s the case, what we’re looking for is a breakout. A breakout to the bottom of that orange-shaded area, a bottom underneath those three X’s or those lows that are represented by those three X’s. A breakout underneath there, we look for a continuation lower, back down, potentially down to the yellow zone, the bottom of that red box on the chart, or even lower.
So, that would be the first thing that we’re going to look for; would be a breakout underneath support. The other thing we might look for and a return of the uptrend would be a breakout above the green-shaded area, because right now that green-shaded area, the red trend line is capping our resistance. We could see. Let’s count them out. We’re looking at six or seven days where it’s just been falling along that red trend line. So, as long as it stays underneath it, there’s potential for us to challenge the lows again, the orange-shaded area, or if it breaks above there, we’ll likely look for a turn back to the most current resistance high or the major resistance high that we’ve seen here into the blue-shaded area, and we can see all that back here. And of course if, at any point, we see a break above that blue zone, we’re likely looking for a continuation back towards 0.9500 once again.
So, there’s a lot of detail from the Daily Chart. Now let’s take all that information down to the 4-Hour Chart. You know, there’s just a lot of stuff going on, on this chart, and it’s kind of hard to see, but I think it’s all important and good information for us as we try to make our intraday trading decisions. Of course we’ve just discussed the orange-shaded area, the three lows we’ve seen here, and a breakout under the orange zone goes lower. Currently we could see some support there, so we’ll put two black X’s here around the orange-shaded area. Of course the green-shaded area we just discussed as resistance and we’ve seen five or six days where the market’s been falling down that red trend line, that green-shaded area. A breakout there goes back to the blue zone. And of course above the blue zone, we go higher.
Currently we’re finding resistance, as expected, into the red trend line and into the green-shaded area. So, there’s a lot of information here. So, what do you do with all this? Well, I think you have to be careful with your decisions. Falling along the red trend line for four or five days does give me a little bit of expectation of a bearish trend developing. We’d look for it to go back to the orange-shaded area or lower. So, if you’re going to trade this as a sell, the green-shaded area becomes your first possibility. We’re right at 0.9375. If you think, “Well, that’s good, but I think a better sell would be the blue zone,” that’s fine too. That would be up towards the 0.9400, between 0.9400 and 0.9435. That’s the blue-shaded area up there.
Now, if you’re on the other side of the fence and you think we’re waiting for the breakout of the upside, I think there’s two reasons to buy this. That would, of course, be a dip back to the orange zone, but that would be the breakout above 0.9375. So, this 0.9375 will be critical today for both sides of the fence. If you’re buying, you want to see a breakout above 0.9375. Then you target the blue zone. If you’re selling, you’re looking for 0.9375 to hold. You look to target down. Evaluate your risk-reward. Right now I think, of course, your risk on the buy side would at least be below this last low here.
Let me zoom in one time. Your risk or your stop placement would at least be below this last low, and that sits down around 0.9347 if you were to take a buy. Underneath there would be your stop if you take a buy. On the sell side, I don’t think it’s much different. I think you’re probably going above this little area of congestion right here. You’re probably going somewhere right around the 0.9400-level if you decide to take a sell. So, you could evaluate your risk. You could evaluate your potential reward. Buy’s reward back to the blue zone. Sell’s reward is back down towards the orange-shaded area.
Now, the Forex Black Book does point to a little bearish trend here. We’ve seen it’s been going down for the past several days. The Forex Black Book is red. So, if you’re going to trade based on the Forex Black Book trend direction, which is a fine indicator to use for trend bias, then you’re looking for a new red arrow. The last red arrow we see here for the currency pair popped up here. We saw a fall of about 35 to 40 pips. Nothing extraordinary, but it did fall from that red arrow. If we get another red arrow, of course that would indicate the momentum is shifting once again back to the downside.
If we don’t get a red arrow, it could be that the market is trying to break through 0.9375 and go higher. So, staying under the red trend – in fact, I could move this red trend line around a little bit. Let’s see what it looks like if I take it to this spike high. It does indicate there’s a little bit more room to go up. I just put it high to high. If I put it exactly on the wick high here, you could see there is a little bit more room to go in towards the 0.9390-level. I don’t think that’s significant. I think it’s more significant doing something like this because you could see more instances where the market challenges that red trend line.
So, right now 0.9375 is your main area to focus in on. If you’re selling this is the spot to do it. If you’re buying, looking for the breakout above 0.9375 for the continuation towards the blue zone for the AUDUSD today.
