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I’m going to get started today on the Australian Dollar versus the US Dollar [AUDUSD]. Starting here on the Weekly Chart, get a historical perspective of the current market price that this pair is at. You follow it back in time all the way back to the left-hand side of the chart. The last time we were down here into this price level right around the mid-0.8700s. You go back in time. We’re all the way back into 2010, so historical price levels that we’re reaching towards right now, into the mid-0.8700s, back to 2010.
The most recent time we challenged, it was just a few months ago, back here into January and February of this year. We could see challenging down here, again, into the 0.8700s. So, pretty historical price levels that we’re reaching into right now for the AUDUSD. We take all that information from the Weekly, down to the Daily, and there again. Here’s our current market price, down here towards the pink-shaded area at the bottom. The mid-0.8700s. You follow it back in here to that timeframe, back into January, where we settled down here.
And what’s interesting about this, and we talk about this in the Trade Room quite often, is looking for a breakout of support. Now, this pink-shaded area today will be our support. We can clearly see that today so far we’ve held above the 0.8750-level and haven’t broken through that pink-shaded area. But I would even say back here in time. You go back here into January. I don’t believe that there was a clear breakout underneath this mid-0.8700-level, the zone highlighted in pink between 0.8735 and 0.8755 because there was no clear singular candle breakout underneath there.
And you could see this red candle that dipped underneath. Then the blue candle opened back up and went right back within that pink-shaded area, and then several days we sat on top of the pink-shaded area and then we had reversal as it started going back up over a longer period of time. So, clearly what I’m looking for is support. I’m looking for support here into the pink-shaded area. I’m looking for it to stay above this zone between 0.8735 and 0.8755. As long as it does, I think we’re looking for clues and signs of reversal to take it back up and potentially even have some retracement of this long downtrend that we’ve been in for several weeks now.
We’ve been going down for several weeks without any real solid retracement, so I think it’s time. I think it’s time that we look for some clues to support and reversal here for this currency pair, because you don’t often see these kind of straight line moves. A straight line straight down, almost a vertical angle to the trend without any sort of retracement. You don’t see those very often in the market. So, I think it’s time for this to have some reversal, and I believe that the 0.8735 to 0.8755 zone could be the spot in which that takes place because historically it’s very accurate as support and we don’t see that breakout underneath it.
If it does, if it does over time open and close, breakout underneath that 0.8735-level, then yes, we’ll look for the continuation lower, which will be into historic lows that we haven’t seen likely since 2010 here for the AUDUSD. It is in a downtrend, so that’s one thing that we need to be aware of as we zoom in here on the the Daily Chart. If you’re looking for opportunities to sell in the downtrend, of course getting close to the pink-shaded area it becomes very discouraging about selling it. You don’t really want to sell it too close to that historical support. You would likely prefer to sell it as it rallies into resistance.
That, at least at this point, would be back to the green-shaded area, into the 0.8820s, 0.8830s, and 0.8840s. That’s the green zone that we see there. Right now we’re right around 0.8780 at the recording of this video, so we need it to go up and probably 40 to 50 pips before we’d even consider a new selling opportunity into the green-shaded area. Buyers are watching for clues to support. Of course the closer it can be to the pink-shaded area will reduce the amount of risk that you have on any buy scenarios here for the AUDUSD.
Let’s take it down to the 4-Hour because as we get down here to the 4-Hour, we start to get a little bit more detail in our trade planning here. Of course as I just mentioned, the closer you can get to the pink zone becomes a much better opportunity to buy it because your risk is smaller. Your stops are under the pink zone and you’re looking for it to go back up. Same thing on the top side. If you’re looking for a sell, I think you want it as close as possible to the 0.8820s, 0.8830s, the green-shaded area, the black trend line. The closer you can get to that reduces the risk, because what’s the risk?
The risk is that it breaks the black trend line, breaks the green-shaded area and continues to go up and reverses for the AUDUSD. So, that’s the risk. If you want your lower risk, higher reward scenarios, you’re waiting for it to reach the green zone or the pink zone to make your trading moves. Under the pink zone we know it’ll break out and go lower. That’s a high probability. Above the green zone we have the potential for retracement or reversal here for this pair.
Right now we have one fib here on the chart from this high right here. Let me take a black X. Put it right here. This high right here in the pink-shaded area in the middle of the chart, where that black X is. Fibonacci from there, down to the low on the chart puts the .236 right here in the bottom of the green-shaded area. So, clearly that becomes resistance now. .382 a little bit between the green and the yellow. 50% top of the yellow. .618 all the way up here towards this blue-shaded area. I could drag that over maybe a little bit better, so we could see that and how it reacts with the current market.
So, Fibonacci of that range. Let’s also take that fib and let’s just draw it out to the highest high. We’ll just take the same fib. Draw it out there. That puts the .236 up here closer to the yellow-shaded area up here into the 0.8900-level. That puts the .382 all the way up here into the blue-shaded area. That’s very interesting because that’s where a fib from a longer range sits there into the blue zone. So, yellow zone, green zone, yellow zone, blue zone will become your resistance targets. If we see reversal here for this currency pair, this also becomes selling opportunities in the direction of the current trend on retracement into those levels.
Let’s actually add both of those fibs on at the same time. The longer one and the shorter one. Let’s go from here, down to the low also. And you could see those fibs here. The green zone, yellow zone, blue zone. Those are your resistance targets. If you’re going to sell in the direction of the trend, those become the spots to sell it. If you’re going to buy, you want to be as close as possible to the pink zone. Look for lower-risk opportunities. Breakouts above the green zone, look for continuations higher for reversal for the AUDUSD today.
