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I’m going to begin the day today with the Australian Dollar versus the US dollar [AUDUSD]. Starting here, on the Daily Chart, we can see two different trends that we want to look at today. First off, the previous up trend, which is represented by this blue trend line, where we saw the market climb from down here into the 0.8800s all the way up here to the highest peak high into the 0.9500s.
Over the past few days though, we’ve seen a little bit of a change in that trending pattern where, instead of being in the parameters of this blue up trend, we saw it fall, break underneath the blue trend line, and continue to pressure lower. Now the question of course would be: are we seeing a complete reversal and a turn back down in the direction of the previous former down trend that we see over here on the left-hand side of the chart, or is this merely a retracement and we see a possibility of going back up and challenging and making new highs for the AUDUSD?
Well, we can’t know that for sure, but we can give us a pretty good idea of where the best places to make our trading decisions will be, whether buying or selling. Well, right now, if you’re looking to sell this in the direction of the current red trend channel that we see here, we’re probably not at the best place sell it, because if you follow this purple-shaded area backwards in time, we can see some historical price action in this level that represents congestion, support, and resistance.
Follow this back in time; you could see some support right here, some resistance right here, but more importantly, we go all the way back to the left-hand side of the chart and we could see, back into July, resistance. Here, in June, we see resistance. So, there’s a great deal of resistance here underneath this purple-shaded area. And even on the far left-hand side of the chart, we can see some support on top of that purple-shaded area and that price level just above the 0.9300-level.
So, following that purple-shaded area back in time, we can see historical price action inside this level or right around the 0.9300-level, or just dipping into the 0.9200s. So, this becomes an area of potential support and not likely the best opportunity to sell it. Now, if it breaks underneath here and gets underneath the 0.9300-level and underneath that purple-shaded area, that would be a better opportunity to look for the breakout and the continuation lower. But as long as it sits on top of it, I expect we’re looking for some intraday support and the possibility of turning back higher and going back up in the direction of the previous up trend.
One last thing here from the Daily Chart is if we take Fibonacci retracement measurements from the lowest low that we see here of the current uptrend. Now, I’m just talking at the bottom of this blue trend line and the bottom of that blue trend. If we take Fibonacci from that low to the current highest high that we could see here into the low-0.9500s, puts the .382 Fibonacci retracement level right at 0.9283. And it’s difficult to see it, but if you look on the far right-hand side of the chart, follow that purple-shaded area to the right-hand side of the chart and you can see the .382 that sits here at 0.9283. That’s the bottom of that purple-shaded area.
So, we have a couple of things going for us that represent support here. Of course the .382 fib at 0.9283 that I just mentioned. We follow that purple-shaded area back in time and we see historical support and resistance at or just underneath 0.9300, and we’re at the bottom of what we might consider a trend channel. The red trend lines. I’ve put a red trend line on top of the current downward movement and I’ve put a red trend line at the bottom, representing the top and bottom of a bearish-facing trend channel.
So, we’re at the bottom of that trend channel, and it gives us a higher degree of expectation that we’re looking for potential support and the possibility of turning back higher in the direction of the trend. So, we have the bottom of the red trend channel, .382 fib, historical support and resistance along the purple-shaded area – all of those pointing to support right now for the AUDUSD. Now, of course, if it does break underneath there, we’ll look for a surge lower, down in towards the 0.9200-level, but clearly an area of decision for the buyers. If we’re going to look for the buyers to step back in, this is likely where they’re going to be doing that.
Let’s take that information down to the 4-Hour Chart and we can see all of that same information. We see the purple-shaded area representing historical support and resistance. We can see we’re coming down towards the bottom of that trend channel – the red trend channel – and that .382 from the larger bullish trend line. So, as long as it’s staying above this purple-shaded area, I expect today that I’m looking for support and the possibility of this turning back higher in the direction of the blue trend line. A break above the green-shaded area – the top of that bearish trend channel – we likely confirm that and we’re looking for a challenge of the highest highs for the AUDUSD.
And again, the only thing that’s really going to change that picture and change my attitude towards this AUDUSD would be a breakdown of all of those indicators, if it gets underneath the 0.9280-level – the Fibonacci that sits there. If it breaks down through this historical support that we see over here on the left-hand side in the purple-shaded area. If it breaks underneath that trend channel that gives us a clear expectation we’re looking for it to push back down towards the 0.9200-level and towards this pink-shaded area, which happens to be where the 50% retracement level of that same Fibonacci range that I took previously from the up trend on the left-hand side of the chart. So, Fibonacci or retracement level sitting at 0.9208. Pink-shaded area becomes the next level of support.
On the other side, if you’re looking to sell this, of course I’ve mentioned a breakdown of 0.9280 could be an opportunity to sell it, or a rally into resistance. A rally into resistance right now takes you back into the green-shaded area and the top of the trend channel. That would be all the way back up into the 0.9360s. So, sellers, if you’re looking to get into this market, you’re likely already in it, as it broke underneath the green-shaded area right here into the 0.9360-level. So, sellers are likely already in it, looking to protect profit as it challenges back down here to the purple-shaded area. A breakdown here goes down even towards 0.9200.
If you’re not already selling, the two places to get in are a breakdown of 0.9280 or a rally back towards 0.9360 one more time. Those are the two opportunities to sell it if you’re not already in a sell on a breakdown of 0.9365 already. If you’re looking to buy this currency pair as a reversal to go back up in the direction of the previous blue trend line, you’re just about there. Just into the 0.9280-level would give you your lowest risk, highest potential reward opportunity. We want low risk. We want small stop placements. So, the lower it goes, remember buy low, sell high. The lower is goes, the better your stop placement will be and the further away your potential profit targets will be.
Your initial target would be back to the green-shaded area, back to the top of the trend channel and of course a break above there will likely look for it to continue higher and challenge the highest highs of the previous up trend for the AUDUSD today.
