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I’m going to begin the day on the Australian Dollar versus the US Dollar [AUDUSD]. Starting here, on the Daily Chart, we could see that this currency pair has been in a downtrend for quite some time. We go all the way back up here to the top of the chart, back up into the mid-0.9700s in October of last year. We started this downtrend at the highest high. We went into a period of congestion. I’ve put these orange boxes here so we could see where the market has developed a pattern within the downtrend, where it would come down, go into a period of consolidation or congestion, fall in the direction of the trend, go into a period of consolidation or congestion, challenge the trend line, fall back down in the direction of the trend, a third period of congestion here inside this orange box, finding resistance into the blue-shaded area and, once again, falling in the direction of the trend.
Now, over the past several weeks – and I’ve put this there yesterday. I’ll go ahead and put it back there today – we’ve seen it develop a period of congestion again. Let me change it to that same orange color so we could see the similarities that’s been in the pattern of the downtrend. We could see that same box, that same period of congestion down there, and we’re now challenging the bearish trend line. We could see the trend line connecting with the last two highs.
Let me click on the trend line. You could see the edit dots – the connection dots – where it connects with the highest high on the trend and this high right here in the yellow-shaded area. I didn’t connect it to this one because if I connect it to this one right here, we could see that it cuts through these candlesticks and kind of discounts this highest high that we see right here and the market is already above that. So, I’m already going to take it back up here to just connect with this high here so it doesn’t cut through any candlesticks within the downtrend.
And over the past three days, we could see that the market has been recognizing that trend line, that diagonal plane of resistance as resistance. It’s been holding underneath that trend line for the past three days, including today, which would be the fourth day holding under that trend line. So, for the time being, as long as it holds underneath that black trend line, as it has for the past three days, and underneath this green-shaded area, I believe there’s a good possibility that we look for this to go back down in the direction of the current trend, which is the downtrend. If, at any time over the next couple of days, we see a break above this green-shaded area and a break above the black trend line, we’ll likely look for the continuation higher or a reversal of the trend for it to go higher, back to the next level of resistance, which would be this yellow-shaded area.
I’ve also taken Fibonacci from the highest high on the chart down to the current lowest low that we could see here of this downtrend. Measuring this downtrend with Fibonacci puts the .236 fib right here at 0.9040. That’s right in the middle of that yellow-shaded area, so that becomes our next level of resistance. Right there into the mid-0.9000s. So let’s go ahead and put an arrow there. This is our next level of resistance. So, if we see the satisfied break of the black trend line, the green-shaded area, and we’ll call it 0.8955. If it breaks through there, we’re likely looking for about a 80 to 90 pip push higher as it pushes into the next resistance – the yellow-shaded area.
And of course, if it continues to push in that direction, we see a reversal of the trend above the yellow-shaded area, our next area of resistance would be all the way back up here into the blue-shaded area that happens to be where the .382 fib sits for the AUDUSD and this previous downtrend, all the way back up here into the upper 0.9100s. Now, if I squeeze it in a little bit, we can see, of course, the support that we’ve seen over the past several weeks, here into the pink-shaded area. The very bottom of the chart. 0.8835, 0.8860, down there into the mid-0.8800s is that pink-shaded area at the bottom of the chart. That has been our historical support over the past several months.
You go all the way back here to the left-hand side of the chart, back into July of last year. You could see the support – the spike low back here on the left-hand side – and of course that’s where we’ve continued to find our lows. Right now that is our major support. Let’s go ahead and put an arrow there. And of course, any break underneath that historical support underneath that pink-shaded area, we’ll look for a continuation of the downtrend as it pushes back into the 0.8700s for the AUDUSD.
Let’s go ahead and move all of that down here to the 4-Hour Chart. Squeeze it back out here. And there’s our area of congestion that we looked at on the Daily Chart. Here’s the green-shaded area and there’s the market holding underneath the black trend line, as I described from the Daily Chart. And again, as long as it holds within or under that black trend line and green-shaded area, potential to go back down to the pink-shaded area at the bottom of the chart. We could see that pattern over here on the left-hand side.
Any push above here, an open and close above the black trend line, above the green-shaded area, above 0.8950, we look for the continuation, once again, all the way back up to the yellow-shaded area, in between the 0.9010, 0.9040-level. 0.9040, again, is where the .236 fib is. And of course a break above that yellow-shaded area, we continue to pressure back up here into the mid to upper-0.9100s – the blue-shaded area at the top of the chart. Pink-shaded area, of course, is our support at the very bottom of the chart and underneath the green-shaded area. And of course a break underneath there, we look for it to go lower.
All that same as from the Daily Chart, but it gives us a little bit of a zoomed in view, a tighter view of the market. So, for the day today, if you’re looking for a trade in the direction of the trend, which is the downtrend, we would look for sells here into the green-shaded area. Your stop is likely going just above the 0.8950s, close to 0.8960 or so probably if you’re looking for a stop placement. Maybe 0.8965. Actually, I might even go to right here, which would be close to 0.8970, into these resistance highs, just above these resistance highs, into the 0.8970s.
So you’re looking for a stop somewhere around 0.8970 or 0.8975 if you’re looking for a sell, because if it breaks out of this green-shaded area, you don’t want to stay in a sell any longer because it’s likely continuing all the way back up here. So, if you sell this into the green-shaded area and the black trend line, stop somewhere around 0.8970, 0.8975. Protects you from the push that it takes above the trend line to go back into the yellow-shaded area.
Now, if you’re looking for a buy scenario for this currency pair today, I would likely wait for it to break above 0.8950. Wait for it to break above the green-shaded area before you look for a buy, because right now, obviously, over the past three days, we have found resistance into this green-shaded area and the black trend line. So, a buy scenario today comes on the breakout above 0.8950. A sell scenario is anywhere inside this green-shaded area, here or even towards the top into 0.8950 and the black trend line, and you look for it to go back down to the pink zone. If you buy it above the green-shaded area, your first target is the yellow-shaded area. Beyond there, you can take it all the way back to the blue zone, into the 0.9100s for the AUDUSD today.
