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I’m going to get started today on the Australian Dollar versus the US Dollar [AUDUSD]. We’re starting here on the Daily Chart because I want to take a look at two familiar areas of support and resistance that you could see highlighted here in the blue boxes. Let’s go back to the left-hand side of the chart. This timeframe back here went between about mid-January, looking about January 16, through February 4, and that’s of this year.
You could see that timeframe here. We found support, major support down at the very bottom of the chart into the purple-shaded area, where it found a reversal point and then began a reversal that took it all the way back up towards the top 0.9500-level. That’s the support at the bottom. We found support and congestion into the pink-shaded area. And if you note back here on the left-hand side, you never saw a full single daily candle open and close, clearly open and close, underneath that pink-shaded area.
So, we found major support into the pink zone. It was just that one time, challenging the purple-shaded area, and then of course in that same timeframe, the resistance that you see here in the green-shaded area. So, that was our historical area of support and resistance and congestion on the left. Then you take it to the right-hand side of the chart. In our current timeframe, we are stuck in that same exact area. You take a look at the blue box on the right-hand side of the chart. You see the support into the purple-shaded area, and of course we’ve already seen some intraday reversal coming off of that purple zone, down there into the mid to upper-0.8600s. We’ve seen it pushing off of there.
Again, no singular candle body. No daily candle body has opened and closed underneath that pink-shaded area. We’ve seen several challenges of it. Several tests within an intraday period, and then complete reversal back above the pink zone. So, both of these areas, blue boxes over here, have not seen a singular daily candle open and close underneath that pink-shaded area, which is around the 0.8735 to 0.8755-level. Just something interesting to note there on both of these areas. Then of course we found support there in the pink zone and now resistance is the green zone.
So, very interesting the similarities between the two timeframes back in January, February, and now here, September and October of this year. Now, if we’re looking for opportunities to trade in the direction of the trend, what is the trend? Of course the trend is lower highs and lower lows. That is a downtrend. We’re underneath the 100-day moving average. We’ve clearly been moving down. Forex Black Book is red. If you’re trading in the direction of the trend, you’re looking for sells on rallies to resistance, and remember that becomes your lowest risk, highest reward opportunity to sell into resistance. It doesn’t mean no risk. It just means a lower risk opportunity because your stop loss placements become smaller.
So, I’m going to actually pull this blue box out a little bit. It matches the left-hand side, and now we’re going to understand that the green-shaded area of course will be our area to watch for resistance. We’re looking somewhere around the 0.8820 to 0.8860-level. That’s that green-shaded area. And again, you go back to the left. You see support, resistance, congestion all in that green zone, so that’s where we expect to see it today. Just into the 0.8820, 0.8830, 0.8840, 0.8850-level, here into that green-shaded area. That’s your resistance.
So, remember, buy low, sell high. If you’re selling in the direction of the trend, you want to sell resistance and we now know and understand that that green-shaded area is our resistance. What’s the risk in that scenario? The risk is that it breaks above that green zone. So, your stop placements, your risk placement is just above the 0.8860-level and above that green-shaded area, because we know, historically on the left-hand side of the chart, that if it gets above there, there’s potential reversal. How high it goes will of course depend on the market, but we could see some further reversal higher if it gets above that green zone. But as long as it stays underneath it, I think we’re looking for another turn back to the pink zone, which is in the middle of the blue box or maybe even another challenge of the purple-shaded area, down there at the bottom.
Of course that is your major support. Let’s take an arrow and put it down here at the purple zone. Bottom of the blue box. If it breaks underneath there, we would look for it to continue the downtrend. So, those are your two major areas. That area right in the middle, the pink zone almost becomes a 50-50 shot. It’s kind of a hinge point, which I like to call it in the Trade Room. A hinge point. As long as it’s above it, we look for it to go up. If it gets underneath it, we look for it to go down. So, it’s kind of that 50-50 chance. If you’re buying and selling at the pink zone, you have to realize it’s a higher amount of risk because you’re not at one of those major areas and it’s one of those places where if it gets above it, it goes higher. Below it, it goes lower.
So, I think the best opportunities to trade the AUDUSD will be the green or the purple zone, the top or the bottom of that blue box that we see here on the chart. Let’s do one more thing before we go down to the 4-Hour Chart. Let’s add in Fibonacci from the current resistance high, just at the top of this strong downtrend that we’ve seen, down to the current support low. That actually puts the .236 fib right at 0.8821. So, very interesting. The .236 fib of this downtrend sits right at the bottom of the green-shaded area.
Take that info down to the 4-Hour Chart. We could see that same blue box. We see the green zone. We see the purple zone. Again, if you’re looking to sell it, I think the best opportunity to do so will be either back to the green zone, which we’re approaching that very shortly. We’re at 0.8790 right now. That’s 0.8820 at the bottom of the green zone, so not too far. About 30 pips or so. That becomes your opportunity to sell it for the day. Back under the pink zone, of course we’ll challenge back to the purple zone. Anytime we push underneath that purple zone, we’ll look for it to go lower.
I would be very discouraged about buying it against the trend, unless it breaks above that green zone. Then that changes the picture a little bit and we see a change of the trend pattern. Remember what the trend pattern is, lower highs and lower lows. If we see a new higher high, which would be above that green-shaded area and the 0.8820-level, we could be looking for some short-term reversal for this pair, but I think the best opportunity today is to sell as close as possible to 0.8820, looking for it to return in the direction of the downtrend. You look for it back under the pink zone, back down to the bottom of the blue box, and of course over time we would look for it to break that blue box and continue the downtrend.
All of that changes if it breaks back above that green-shaded area. We could be looking for it back to the blue zone, back in the middle of the chart, or maybe even further. If it continues to pressure in that direction, wouldn’t be too difficult to see it here into the pink-shaded area. It wouldn’t be too difficult, as I said, here into this blue-shaded area. Yellow zone maybe not so much, but I guess it could find some resistance there, but blue and pink zone I think would be your next areas to shoot for if it breaks the green zone. But for the time being, for the intraday, I think selling the green zone will be your best opportunity for the day on the AUDUSD.
