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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, we could see that the past seven days, we’ve been stuck in a period of congestion. This yellow-shaded area up here, top right-hand side of the chart, goes between the top at 0.9260, down to the bottom of that yellow-shaded area at 0.9220, and seven days we’ve been stuck inside this zone of congestion.
Well, this isn’t really anything new. It’s not new information because if we go prior to this past seven days, you go back here in this timeframe. We see about ten days that held as support on top of 0.9260, so we knew that that price level was going to be very important for the AUDUSD. You follow it back even further and a duplication now of this period of congestion back here. Except for the last time we were going in this period of congestion, we were coming off of a bull market. The buyers were in control, driving it higher, found resistance at 0.9260, bounced around for several days, about eight days inside this yellow-shaded area back here, finally breaking to the topside and continuing the bullish price action.
The difference today is that we’re coming off of a bear market. We’ve found resistance up here in the green zone. The sellers took control, drove it down to the yellow-shaded area, found support at the 0.9220-level, which was our support back here also, and now bouncing around for seven days inside the area of congestion. So, the expectation, opposite of what we thought of over here on the left-hand side, where we were coming off the bull market, looking for the break to the topside. Now coming off the bear market, we would be expecting a break to the bottom side of this congestion. So, what we’re going to look for today is a breakout of congestion underneath 0.9220. Underneath the yellow-shaded area and these last supports that we see here, we’ll look for the continuation of the bear market and a push down to the next support, which will be this blue-shaded area, 0.9160-level.
So let’s go ahead and put an arrow there also. This becomes your next potential support. So, if you decide to sell it or if you’re already in a sell, then, from the 0.9200-level break, we look for it down into the 0.9160s. So, we’re looking at about 50 to 60-pip push if it does break the yellow-shaded area back down to the green zone. There is other reasons to expect a push down here into this 0.9150, 0.9160-level. If you take Fibonacci retracement measurements from the low down here, bottom left-hand side of the chart, to the current resistance high. So, the last uptrend leg that we see here for the AUDUSD, we find the .382 Fibonacci retracement level at 0.9154. That’s right at the top of that blue zone.
So, easily see that if we break the yellow zone, that .382 fib and the blue-shaded area become our target. Speaking of that same fib range, if you take that same fib range, low to high there, the .236 fib is at 0.9271, which is the top of our yellow zone and our current resistance. You could see that we have held, over the past seven days, underneath that .236 fib. So, since we’re underneath the .236 fib, the 0.9265, 0.9270-level, we’re looking for the continuation down to the .382, so that gives us a little bearish bias right now for this pair.
The other thing that gives us a bearish bias of course is the Forex Black Book trend bar down here at the very bottom of the chart is red. It has been for several days now, so that gives us a bias to the down side. So, all of that expecting sells on rallies into resistance or breaks of support, targeting back down here towards 0.9160. Now, all of that is invalidated and that whole outlook changes if we break to the topside of the yellow zone. If, at any point, we break back above 0.9260 or so, 0.9270, the top of the yellow zone, then we begin looking for a return of the uptrend and a challenge back to resistance, which would be likely this pink-shaded area as our first area of resistance.
But at least at this point, the past seven days has been unable to break the topside of that yellow zone. Remember your trend definition. Higher highs and higher lows is an uptrend. Lower highs and lower lows is a downtrend. Over the past several weeks, we have created lower highs. We could see that along the black trend line. What we need to see for a turn in the direction of the downtrend would be a new lower low. So, I would expect, at this point, this 0.9220-level. You see the spike low here. You see the support lows here. If we’re going to see a change of the trend pattern and a downtrend pattern develop, we need to see a lower low. So we need it to breakdown through this yellow-shaded area if we’re going to see a continuation lower.
Let’s go ahead and take that information down to the 4-Hour Chart. And as we get down here to the 4-Hour Chart, I want to just bring these arrows a little tighter. Of course we know underneath 0.9220, we look for it to go down. Above 0.9260, we look for it to go up. We have been bouncing around for seven days in here. Now, if you were in the Trade Room yesterday, in the Trade Room yesterday, I suggested that I was already in a sell. I not suggested, but told you that I was already in a sell from the 0.9260 test yesterday.
If you took that as a suggestion and also sold towards the top of our congestion zone into the 0.9258, 0.9260-level, into the top of the yellow zone, then you are now sitting with profit. It’s my suggestion now that if you sold it, 0.9260, top of the yellow zone, that you protect that profit as it reaches down now into the 0.9220s by moving your stop to break even or better, looking for the breakdown now of the 0.9220-level and further profit as it goes down into the 0.9100s.
Protecting that trade means that if it goes back up, you can’t lose on the trade. And if it breaks to the topside, then of course you’ll be glad you did that. So, anybody that sold along with me into the 0.9250s and 0.9260s, now seeing a pretty decent amount of profit. Protect those trades. If you didn’t sell it up there, I don’t think I might sell it right now, but wait for the breakdown of 0.9220, underneath the yellow zone. Then that becomes a selling opportunity for anybody that’s not already in a trade. Buyers right now, I think it’s a buyers beware market for the AUDUSD. I think if you’re looking to buy it, you want to see it go much lower. I think you want to see it breakout under this congestion, challenge back to the .382, into the blue zone. That becomes your best buying opportunity.
Really, the only other opportunity to buy it, other than a dip down to support, would be the breakout above the yellow zone. I think if you’re looking to buy it, that’s really your next best effort right there; is if it breaks back above 0.9260, then you could target back to the pink-shaded area for the AUDUSD today.
