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I’m going to get started today on the Australian Dollar versus the US Dollar [AUDUSD]. First off, starting here on the Daily Chart, a couple of different trends that I want to take a look at. Of course the previous downtrend. The black trend line representing that previous downtrend. I define the trend as having lower highs and lower lows.
Now, over the past several weeks, after making the lowest low on the chart, we saw a change in that trending pattern and it started creating higher highs and higher lows. When we, first off, saw the breakout above that black trend line and it started creating lower highs and lower lows as it broke out above that black trend line. And then I represented the uptrend with the two blue trend lines. The bottom blue trend line of course representing the higher lows. The top trend line showing where the highs were along that trend channel.
We could see that currently the market is challenging the top of that trend channel. As it challenges the top of the trend channel, we follow this yellow-shaded area back in time, historically this is a significant price level between the 0.9250-level and 0.9280-level. Follow it back in time. You go back here to the left-hand side. November of 2013, you saw support here into the same 0.9280-level. You follow it a little bit further back into September. You could see some support again, right there into 0.9280 in this timeframe. And then you go back to the far left-hand side of the chart and many times finding resistance into that same yellow-shaded area on the far left-hand side of the chart.
So, not only are we challenging the top of the blue trend channel that we’ve been discussing in the Trade Room over the past few weeks, but also challenging into a historical price level of resistance and support. As it challenges here and as we’ve been pushing up within the uptrend, we can begin looking for indications or signs of reversal. Now, of course, there’s a possibility that it could break through this yellow zone and continue to pressure higher. That’s what happened over here, back in September of 2013. We saw the eventual break above the yellow zone and the continue to pressure back into the 0.9700s.
But until it does that, until it clearly breaks above this yellow zone, there’s potential for resistance as we’re seeing right now and reversal. If it does, indeed, reverse, the next support that it would follow it back down to would be the blue-shaded area, where last week we were looking at resistance inside this area, into the mid-0.9100s.
So, let’s go ahead, first off, here on the Daily Chart, put a couple of arrows here that give our expectations for the day today. Within or under this yellow-shaded area, we’re watching for clues to reversal and the possibility of this going back down towards support into the blue-shaded area. If we see a clear, distinct break over the next couple of days above the 0.9280-level and above that yellow-shaded area, we could begin looking for a continuation of the uptrend. So, your best opportunities to buy this currency pair in the direction of the current trend would be dips into support. In fact, I would prefer it to go all the way back down to the blue-shaded area. Then that becomes our next buying opportunity, or clearly a break above, over the next couple of days, 0.9280 could become that clue that we need for the continuation higher.
The other opportunity for the day today, and I think this is an intraday opportunity, is looking for indications of reversal here into the yellow zone and the possibilities of selling this to go back down towards that blue-shaded area. And if history going back to the left-hand side of the chart, June and July of 2013, is any indication of what we could expect here in the yellow zone, it could be a while that it finds resistance here into this yellow-shaded area.
Let’s go ahead and take it down to the 4-Hour Chart. Now, of course, just because history has shown resistance here doesn’t guarantee we’re going to see resistance here, so that’s why I say we want to continue to watch for clues to reversal. And here is that yellow-shaded area at the very top of the chart. Clues to reversal would be a change in the pattern. The pattern, over the past several weeks, has been higher highs and higher lows. So, if we distinctly see lower highs and lower lows, that could be a change in the pattern that we need, and we’d begin to look for it to go lower.
I suspect that right now 0.9245, 0.9250, the bottom of that yellow-shaded area will be the breakpoint that we need. If it can get underneath 0.9245, just like it was underneath it here, and find resistance once again under that yellow zone, that will give us our first clue that we’re likely looking for it to go back down here towards the blue zone. Staying within or above, of course, the yellow-shaded area continues the bullish trend for the AUDUSD. So, clearly watching for clues to reversal here. Candlestick formations that imply reversal and the sellers taking back over.
Of course the last two four-hour candles have been bearish, but I don’t think that really constitutes a change in the trending pattern yet, here for this currency pair. I believe we are still in the uptrend pattern. However, if we break underneath 0,9245, 0.9250 today, a clear open and close underneath here could be our next clue that we need and could provide opportunities as resistance underneath the yellow-shaded area, once breaking underneath it, to target back down to the blue-shaded area today.
Again, I’m not really excited about entering buys right now for the AUDUSD at this highest high point. Remember: buy low, sell high. That’s the easiest way to figure out your best lowest risk, highest reward opportunity. We’re at a high point within the trend. Not really your best opportunity to buy it. Buying on dips into support become your best opportunity, and I suspect, at this point, your best opportunity to buy it would be back down in the blue-shaded area.
I haven’t done it yet, but I would also suspect that if I take Fibonacci of the longest trend here. And when I say longest trend, I go back out to the Daily Chart and we talk about the trend at the bottom. Let’s take this previous fib off. Let’s take Fibonacci retracement measurements from the lowest low all the way down here at the bottom to the current resistance high. And just as I suspected, I’m going to zoom in one time here on the Daily Chart. Taking that fib from the lowest low to the current high puts the .236 Fibonacci retracement level right there in the middle of the blue-shaded area. So, quite a long ways down before we reach into a major Fibonacci retracement level right there into the blue-shaded area.
Yes, there’s argument for shorter Fibonacci. You could probably take Fibonacci here and drag it up into this low right where it made the last blue low or last low here in the red trend line, and even still, .236 is just underneath the 0.9200-level. And the .382, once again, overlapping right here inside the blue-shaded area. So, Fibonacci also showing us potential retracement here for the AUDUSD as we look for new opportunities for the next couple of days on the AUDUSD.
