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I’m going to begin the day today on the Australian Dollar versus the US Dollar [AUDUSD]. I’m going to start here on the Daily Chart. Make a couple of observations first, and then we’ll start working our way down to the smaller compressions. First off, here, zoomed out so we could see the beginning of the blue trend line, all the way down here, bottom left-hand side.
Back into January of this year, we started an uptrend that began pushing as it went from down here into the 0.8600s, all the way up to the top of the trend into the 0.9500-level. However, since March of this year, where the vertical, blue line is on the left-hand side of the chart, we could see we’ve been in a bit of a range, and I’ve identified that range with the red box here on the chart. The bottom of the range being the yellow-shaded area at the bottom of the red box and the top of the range being the blue-shaded area at the top of the range box. So, we’ve been kind of stuck in that range since March of this year, finding support at the bottom and resistance at the top.
Most recently, we’ve come down to challenge that support. What’s interesting also is that I’ve placed a 100-period or 100-day moving average on this chart. And prior to that March timeframe, we were underneath that moving average for quite some time. You could see it got underneath it back in November of 2013, underneath the moving average, came back up, finally settled out around that moving average for a while, then broke above it and started moving higher.
Most interesting right now is we are now underneath that 100-day moving average. If it can sustain the hold underneath there, it could be pointing to our continuation lower as we have seen that breakout underneath that moving average. Let’s go ahead and zoom it in a little bit. Now that we can see that history, let’s go ahead and take it down here like this, and we could see underneath that moving average I also put a black trend line, representing the most recent momentum, the most recent trend for this currency pair. We could see the fall coming from the top of the black trend line, pushing now all the way back down to the bottom of our range identified by the red box and the yellow-shaded area.
Past five days or so, four days previous, today included. The five days we have found support down here into the mid-0.9200s, the yellow-shaded area. I believe that all we’re doing is accumulating. The sellers are accumulating and we’re likely to see a return of this downward movement, kind of similar to what happened over here around the moving average, where we saw some accumulation. You see the market taking a little bit of a pullback, found resistance, and then the sellers came back in and drove it back to the bottom of the range. I think that’s what we’re in right now. I think we’re in a period of accumulation, where the sellers are accumulating orders. It’s starting to rise a little bit. We’re looking for resistance, and then eventually we’d look for a return of the sellers and a breakout of this longer-term range that we’ve been in since March.
Forex Black Book of course is red at the bottom. That’s another clue to bearish momentum. Not to hard to see that we have seen that bearish momentum over the past several days. So, a couple of different things here. We’re under the 100-day moving average. We’re under the black trend line and the Forex Black Book trend bar is red, meaning that I have a sell bias right now. So, selling on rallies into resistance.
Now, yesterday in the Trade Room, I spoke about the fact that I didn’t want to sell it too close to the yellow-shaded area. Obviously the yellow-shaded area is current support, and I didn’t want to sell it too close to that yellow-shaded area. I want it to pull back. I want it to go back up, giving me a better opportunity, a better price for my money. And I think that as we approach this blue-shaded area, we are at that area where we would expect. We’re looking for resistance and now we’re looking for the sellers to return and drive it back down. Then we look for the breakout underneath the yellow-shaded area and a continuation as we look for it to push back down here towards this pink zone, which will be our next area of support down into the mid to low-0.9100s.
Now, all of that will change of course if the market changes its mind and pushes it back above the black trend line and likely back above the moving average. Then we start to look for it to go back up towards the top of the red box, the top of the range, and maybe even a return of the previous uptrend. So, we’re at that critical decision point. Are we going to remain in the downtrend, the downward bias and continue to pressure back down towards the bottom of the range and a breakout, or are we going to breakout back to the top side and go back in the direction of the uptrend?
Critical decision point, but I think the blue and the orange-shaded area that we’re approaching right now will be that decision area. Let’s go ahead and take that information down to the 4-Hour Chart. You could see the blue-shaded area. Follow it back in time. You could see historical congestion and support over here. We know that support helps us identify resistance, so we’re right into that area right now where we would expect to see that resistance identified with that historical support.
Also, let’s take some Fibonacci. I want to try and get these arrows a little bit closer here. Let’s go here and here. Actually I’m going to put one more arrow up here into the orange-shaded area. Now let’s take some Fibonacci. First off from the high of the black trend line, down to the current low. Very interesting here is the .236 fib sits at 0.9294. That’s where we currently are holding as our resistance. .382 Fibonacci retracement level of that previous downtrend sits at 0.9328. That of course is right there at the orange-shaded area and the black trend line. So, both of those areas showing good information about resistance for the AUDUSD today.
Let’s also take a Fibonacci retracement measurement from the spike high here in the middle where the black trend line is, down to the current low. And in doing that, the .382 Fibonacci retracement level is at 0.9290. That’s basically where the current market is. 50% sits at 0.9306, and the .618 is at 0.9322. Again, back up towards the orange-shaded area. So, clearly Fibonacci. The longer range, the shorter range showing us the blue-shaded area and the orange-shaded area are the areas to pay attention to if we’re looking for sells in rallies to resistance in the direction of our current downtrend for the AUDUSD.
Forex Black Book, again, is red, so what we’re looking for now is resistance, a shift in momentum to go back down, and a new red arrow to pop up. Could be here in the blue-shaded area sometime today or it could be even higher into the orange-shaded area, but this is the way the Forex Black Book indicator is. We see the move up, the momentum moving up. What we’re now looking for is that shift in momentum, a red arrow to pop up in agreement with the red trend bar down there at the bottom of the chart. That tells us the sellers are coming back in and we could look for that turn back in the direction of our current trend that we’re looking for.
So, for me today, it’s sells on rallies into resistance in the direction of our current trend. Blue zone: first opportunity. Orange-shaded area: last opportunity. A break above the orange zone, we’re likely looking for a return of the uptrend for the AUDUSD.
