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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, we go back to the left-hand side of the chart, all the way back to the beginning of 2013. We began this downtrend that started all the way up here into the upper-1.0500s. It began the fall, pushing all the way down through the middle part of the year into July and August, when we found the base into the 0.8900-level. Saw a little bit of a retracement and then a new leg of the downtrend began here into October, and now seeing a break of those previous historical lows. Those historical supports that we see back here – we’ve now seen a confirmed break of those lows.
Let’s go ahead and zoom it in here so we could see that a little bit closer. And again, there’s those lows on the left-hand side. What’s significant about this is over here on the left-hand side, if you note here, we saw a little bit of a spike. The first attempt here in August. The spike underneath the pink-shaded area. Then it got right back above it. Then we came back down and held within the pink-shaded area and started moving back up again. In the most recent days, we’ve seen a complete change of that pattern, where that historical support – the pink-shaded area there – we’ve now see the market not only push through it, but now clearly open and close underneath that pink-shaded area, giving us a stronger confidence that we’re more likely to continue to be bearish for this currency pair.
And all we have to do is look back in time and see some similar actions where the market, within this downtrend, would open and close underneath the support and continue the downtrend. I’ll just put a couple black X’s where we’ve seen that happen. We see it up here where the purple-shaded area, where it opened and closed underneath the purple-shaded area, bounced around and underneath it as resistance, and then began the fall. Then again we saw it here into the yellow-shaded area, where it opened and closed underneath it, found resistance under the yellow-shaded area, and then began the fall. And then again here into the blue-shaded area, where it opened and closed underneath it, used that blue-shaded area as resistance, and began the fall.
So, now, in a similar fashion, we have now seen the market break down underneath that pink-shaded area. So, now what we’ll begin to do is use that same pink-shaded area, which was historical support. We’re now going to begin using that as resistance for our new trading opportunities, selling on rallies into that pink-shaded area now as resistance for the continuation of the downtrend. And the only thing that’s going to invalidate that would be a change of the pattern, which would be of course a break above that pink-shaded area. Then we’ll likely look for it to go back up again.
So let’s go ahead and put some arrows here that represent our expectation into that pink zone. Holding within or under it now that we’ve opened and closed underneath it, that becomes resistance and selling opportunities into the 0.8880s, 0.8890s, and into the 0.8900-level. The only thing that invalidates that action would be a break back above that as a breakout back in the other direction, potentially to be even a trend change of the AUDUSD.
Now, continuing on down, we went back in the Trade Room yesterday and looked at some historical support and resistance. Mulit-year historical support and resistance. 2010, 2009, and 2008. The green and the blue-shaded areas at the very bottom of the chart become potential support targets as it continues to pressure lower. I’ve also taken some Fibonacci from previous trend ranges and we could see some Fibonacci here just underneath the green-shaded area and just underneath the blue-shaded area, but those become our potential targets. The green and blue-shaded areas at the very bottom become our next potential targets on the continuation of the downtrend.
And we can see very similar, again, actions up there within the downtrend, where it would break a support, make a new support, break a support, make a new support, break a support here into the blue and yellow-shaded area, mad a new support in the yellow-shaded area and broke through there. Support was into the pink zone. Now our next support of course is here at 0.8800 and into the green zone. All right, so we could see that 0.8800, even down into the mid-0.8700s, is the green-shaded area at the very bottom of the chart. Continuing in the direction of the trend, that becomes our next target.
Let’s go ahead and take this information down to the 4-Hour Chart. And as we get down here to the 4-Hour Chart, we can already see that the market has made one attempt to come back up here into this pink-shaded area and use that as resistance again. So let’s go ahead and bring these arrows over. I’m going to squeeze it out just a little bit so we could see the further movement of that trend. First off, we could see the market challenge back up underneath the 0.8890-level and now seeing a little bit of a fall as it comes back down.
Let’s go ahead and zoom back in. It’s easier to see it in that zoomed in view. We’ve seen it come back up into that pink-shaded area – 0.8890 – and now starting to come back down towards the 0.8857-level. A continuation further down challenges this low here and we look for it to push once again all the way back down to 0.8800. So, I expect, as long as it stay under the pink zone, your trading actions are for sells underneath the 0.8890-level, targeting 0.8800. And of course if it every breaks underneath the green zone, we’ll do the same thing that we were just describing on the pink-shaded area.
Otherwise, a push back above 0.8930 or so, which is our current resistance – the pink-shaded area -, we’re likely looking for it back up here into the yellow-shaded area and closer towards the longer-term trend line. Let’s go ahead and put an arrow down here into the green-shaded area also because that will be support. We’ve looked at it back in history. It’s very likely to be some support there, very similar to what you see here into the pink-shaded area. You see it broke down under the yellow zone and found much support on top of that pink-shaded area. So, this is our target for support into 0.8800. So, selling under the pink zone, targeting the green zone. At no point right now am I likely to look for a new buying opportunity until it gives us clues to reversal for this currency pair, and of course we don’t see any clues to reversal, no changes of the trend pattern of candlestick formations that imply reversal.
So, right now the only focus for this currency pair is selling to target towards 0.8800. The best lowest risk opportunities to do so will be into the pink-shaded area for the AUDUSD today.
