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I’m going to begin the day today on the Australian Dollar versus the US Dollar [AUDUSD]. Starting on the Daily Chart, we can easily see that this currency pair has been in a downtrend for quite some time. You go all the way back to the top of the trend, into the mid-0.9700s. That’s back in October – late October – of 2013. We began to see the downtrend take place as lower highs and lower lows continue to pressure lower, as it pushed all the way down here into the mid-0.8700s at the bottom of the chart, into the purple-shaded area.
Now, over the past four days, we’ve continued to find support here right around the 0.8760 to 0.8770-level at the bottom of the chart. And now, today, we could see a little bit of a rebound as the market starts to come back up and push back up within the overall downtrend. Now, we’ve seen multiple examples of this over the life of the downtrend. And I want to show you a few examples of things to look at over the next couple of days.
I’m going to place a black X right here on the chart, into the middle of the chart, where the pink-shaded area is and the black trend line connects to the highest high that we could see right here, where the black X is, into the mid to upper-0.9000s. Right around 0.9065. Follow that backwards in time. The main thing I want you to see here is this historical area of support into the same pink-shaded area. So, the support over here on the left helps us identify the resistance, where it turned back down in the direction of the trend. So that’s important for us to remember.
Then let’s go back up here to the top of the chart. And let’s go right here where the yellow-shaded area is, and we could see a resistance where the market found resistance and started going back down in the direction of the current trend and the historical support that lines up with that. So, we see support becoming resistance. So, there’s two examples within the downtrend of the market rebounding, coming back up within the downtrend, finding resistance, and going back down.
There is another example of that right here. We could see the market holding underneath this resistance into the blue-shaded area and starting to turn back down in the direction of the trend. So, three times finding resistance and turning in the direction of the trend. So, as this comes up, what we’re looking for is resistance once again. We’re looking for it to find resistance and turn back in the direction of the trend. As long as it stays under the black trend line, that would be our main focus for the AUDUSD.
So, as it comes back up here – and let’s go ahead. I’ll just put an arrow here. As it comes back up closer to the green-shaded area, as close as possible to that, we’d be looking for resistance and the turn back down in the direction of the trend. Now that all can change if we start to see a change of the trend pattern. Remember the pattern of the trend as lower highs and lower lows. If we start to see higher highs and higher lows, and specifically a break above the green trend line, new higher lows and higher highs beginning to develop above this pink-shaded area, then we begin to look for a change in the pattern and change of our trade focus.
Right now our focus is trading in the direction of the downtrend on rallies into resistance to go back down in the direction of the trend. Let’s go ahead and take this down to the 4-Hour Chart, and you could see that same green-shaded area up here. That helps us identify where our next resistance is. I’m actually going to zoom it out a little bit here so you could see that green-shaded area in its entirety. You follow it backwards in time. We could see the historical resistance back here, helping us identify where the next potential resistance will be.
Now, right now we are sitting on top of this yellow-shaded area. So, for those folks that are looking to trade in the opposing direction of the trend or possibly watching for clues to that trend reversal or trend change, you’d be looking for potential buys now into support. And I believe that’s right here into the yellow-shaded area. Follow it backwards in time. We could see, most recently, resistance in here, into the middle part of this yellow-shaded area. Then you go back here and you could see support.
So, these supports, these resistance helping you identify your current intraday support. So, as long as it stays within or above this yellow-shaded area, between 0.8830 and 0.8860. This is about a 30-pip zone highlighted in yellow. As long as it stays within or above it, potential to go back up to the green zone. If it breaks underneath the yellow-shaded area, then we’ll look for a continuation of the downtrend and push back down here towards the purple-shaded area and into the 0.8770-level for the AUDUSD.
So, above the yellow zone, potential buys to target the green zone. Once it reaches the green zone, you look for resistance and possibility of selling in the direction of the trend. Let me go ahead and zoom in one time. I’ve also taken Fibonacci from the highest high to the lowest low that you see here on this view of the 4-Hour Chart. In doing so, we see the .382 fib sitting here at 0.8880. The current market is finding resistance there, but I still pushing up here to the green-shaded area is more significant as a low risk, high reward opportunity. The 50% sits at 0.8920. .618 sits at 0.8959.
And again, if I zoom it out here, you could see how significant that green zone is. It’s not that it can’t find resistance here before reaching the green zone, but it’s a more significant area of resistance and more likely a safer opportunity if you’re looking for a sell in the direction of the trend. Not a guarantee of safety, but at least a higher probability of safety if you wait for the green-shaded area, like what we see over here on the left-hand side.
So, for the day today, for the intraday traders, potential buys into the yellow-shaded area, targeting the green zone. Your risk on buys is underneath 0.8830. That way if it breaks back underneath the yellow zone and starts to target the purple zone, you won’t stay in a buy any longer. Buys on top of the yellow zone are a possibility, targeting the green zone. Sells into the green zone are a possibility, or the other side of this story is if it breaks back under the yellow zone. Potential sell opportunities start to take place there also. Zooming it back in here into the 4-Hour Chart, you could see that if it gets back under the yellow zone, we’ll target back down to the purple-shaded area at the bottom of the chart.
So, for the day today, the yellow-shaded area is your critical decision point. Staying above it, we target the green zone. Getting underneath it, we target the purple zone for the AUDUSD today.
