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I’m going to get started today on the Australian Dollar versus the US Dollar [AUDUSD]. Starting here on the Daily Chart, in the Trade Room we’ve been studying this big red box that you see here on the chart over the past several weeks, representing a kind of a wider range that this currency pair has been in.
The bottom of that range and box down here into the yellow-shaded area between 0.9260 and 0.9230. And you can follow it back in time. You see some support here. You see support and congestion on the far left-hand side of that yellow-shaded area at the bottom of the red box. Then you go back up to the top. We’ve seen resistance. The blue-shaded area at the top, all the way back here into April. Resistance over here into June. One little instance where the market pressured above the red box and range, but the next day came right back down into it. So, no real solid open and close above the range or no real breakout.
Then it came back down, retested again here in July, and now we’re back down towards the bottom of the range. But we’ve seen a little bit of a change here for this currency pair. All the while on the left-hand side of the red box, we were above the 100-day moving average. So, we can see that moving average coming into play here. It’s a simple moving average. 100-period here on the Daily Chart, and we could see it was above that moving average.
A few weeks ago though, we saw the market push underneath that moving average where that became resistance for the AUDUSD. You could see that over here where you see five or six days finding resistance underneath it, challenged the bottom of the range, came back up. We can see four days challenging underneath there, yesterday even touching the moving average, and now a fall off of it.
So, it’s my expectation that as long as it stays underneath that 100-period moving average and in the bearish trending pattern that we’re seeing right now, I think selling into resistance is the best option for the AUDUSD, and so I have been selling from the orange-shaded area here for the AUDUSD over the past couple of days and sitting with profit right now as it challenges down into the blue-shaded area. Of course I would like to see the continuation lower. It’s bounced off of the resistance, moving average, the orange-shaded area. Now we’re finding support into the blue zone. If we’re going to see it continue lower, we need to see the break of that blue-shaded area and a continuation down to the yellow zone at the bottom of our longer-term range.
And over time, if we’re going to see the trend continue, we will definitely need to see the breakout underneath that yellow-shaded area. Forex Black Book trend bar is also red, which gives us a bearish bias. So, right now underneath the moving average, we have a red trend bias with our Forex Black Book. We have found resistance. All of that pointing to evidence of resistance and continuation of the downtrend.
What do I mean by a downtrend? In fact, let’s go ahead and zoom it in one time here on the Daily Chart. We looked at this in the Trade Room. That’s why these circles are here. Remember how I define a trend and how you define a trend could be a little bit different, but the way I easily define a trend is I just say lower highs and lower lows are a downtrend. That’s really the price action within a downtrend, is lower highs and lower lows. And I’m actually going to put another circle here like this because we can see we’ve now seen four instances of a lower high. Four circles on the chart. If that pattern is going to continue, which is the pattern of a downtrend, the next thing we would expect to see would be a new lower low and of course our last low is this low right here in the yellow-shaded area.
So, it will have to break that low, break through the yellow-shaded area if we’re going to see a continuation of the bearish or downtrend pattern. Now, we don’t know if that’s going to happen, but that’s the expectation that we’re going to be watching for if we expect the trend to continue down. So, just the opposite. If it’s going to go back up and we’re going to see reversal, what do you expect we’ll look for? A new higher high. So, if it breaks above that last high we’ve just created in the orange-shaded area, if it breaks above the moving average, then of course we look for it to go back up, likely all the way back up to the top of the red box and back at the top of the range.
So, we have two critical areas that we’re going to look for right now. The orange-shaded area being our resistance, the yellow-shaded area being our support, and we’ll put a couple of more arrows here. Here’s our resistance here into the orange-shaded area and here is our support down here in the yellow zone. Now, in the intermediate time, in the intraday timeframe, we also see this blue-shaded area holding as some support right now. A breakout underneath there, we’ll likely look for the continuation lower. I’ve taken several different fib ranges. In fact, from each of these first three blue circles I’ve taken Fibonacci. You could see a congested area where Fibonacci comes in and intersects right here inside that blue-shaded area and comes together. That’s helping us identify that as support.
If it gets underneath there, of course the yellow zone. Staying above it, back to the orange zone. And of course above the orange zone, we go back up. So, the closer you get to the orange-shaded area, less desirable for buying. The closer it gets to the yellow-shaded area would be more desirable for buying. The closer it gets to the orange-shaded area, more desirable for selling and less desirable for buying. The closer it gets to the orange-shaded area, the more desirable it could be for buying. So, keep that in mind as you go through your day on the AUDUSD. The trend is down, and that’s the direction that I continue to trade and put my efforts in here for the AUDUSD.
Let’s zoom it out. Take it down to the 4-Hour Chart. You could see all of that here, and I can bring this in a little bit because we’ve been studying all of these highs here. There it is, finding support into the blue-shaded area. If you’re selling, you want to protect profit because it’s finding support here. In fact, I’m going to put one more Fibonacci retracement level here on the chart. I know it’s starting to get congested and cluttered up, but let’s put from this low down here at the bottom of the chart to the current resistance high, and once again we see the 50% retracement level sitting right here in the midst of the blue-shaded area.
So, we’re right around the 50%. .618, 0.9279. We’ve already seen the market tap into that with the last four-hour candle. Anything below that of course we’ll go back down towards the yellow-shaded area. If you’re selling, you’re desiring the breakout under the blue zone. If you’re buying, then you’re looking for the turn back above 0.9300 and a push back towards the orange-shaded area. I’m selling from the orange zone, protecting profit as it goes down. I’m looking for the breakdown of the blue-shaded area and the continuation down to the yellow zone.
Forex Black Book pointing down. We see three red arrows up there close to the orange-shaded area. All of that pointing bearish right now for this pair. If you’re going to sell it again, go back up to the orange zone. If you’re going to buy it here or in the blue zone, or back down into the yellow-shaded area become your opportunities for the AUDUSD today.
