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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, over the past several months, we have been studying the previous downtrend. The downtrend started all the way up here into the 0.9750s, falling all the way down into the 0.8650s.
During that timeframe, we saw lower highs and lower lows defining the downtrend. Over the past several weeks though, we’ve seen a change of that trending pattern where we saw the market turn higher, break back above the trend line representing that previous downtrend. So, we broke above the black trend line and have gone into a period of ranging or congestion between the blue-shaded area here into the 0.8900-level and the pink-shaded area into the mid-0.9000s.
Several weeks ago, we saw the market challenge here into the pink-shaded area into the mid-0.9000s and make a fall all the way back down to the blue-shaded area. Earlier this week I began talking about support here into the blue-shaded area. We have some Fibonacci into that level. We also looked back to the left-hand side of the chart and we could see support over here, back in August and all the way back in early and late August. On the left-hand side of the blue-shaded area, we see support.
So, that support was duplicated this week and we can see the market now climbing all the way back here into the pink-shaded area, into the mid-0.9000s. Also, this week, we’ve been observing the pattern of the trend, where we could see a potential reversal pattern. The inverted head and shoulders with the left shoulder on the left-hand side, the head in the middle, and the right-hand shoulder on the right-hand side along the red trend line. If that continues to play out, we’ll likely look for the breakout above the pink-shaded area at some point in time and a continuation as it presses higher into the 0.9100s or higher for the AUDUSD.
Another indicator that we can look at here on the Daily Chart is Fibonacci. We take Fibonacci from the highest high of the longer-term downtrend down to the lowest low. The same trend that we looked at a few moments ago. This downtrend here. Taking Fibonacci of that last downtrend, we find the .382 Fibonacci retracement level at 0.9078. That’s just at the top of this pink-shaded area. So, clearly we could see Fibonacci there. Historical resistance here into February. Historical resistance here into January. We could see some support even further back into November of 2013. And even if you were to drag that pink-shaded area back all the way to the left-hand side, July of 2013, we can see some support on the left-hand side of the chart in that same price area.
So, again, this is a critical price zone, into the mid to upper-0.9000s. The pink-shaded area. 0.9050 to 0.9080 will be our resistance zone for the day today. Any break above there, of course we’ll look for a continuation of the bullish momentum, but I expect we’ll likely see some bounce off of here. Historically we’ve seen resistance here before and several bounces off of this resistance level, so I would expect, on an intraday basis, we may see a bounce off of it.
Either way you look at it, even if you were deciding that you wanted to buy it in the direction of the current momentum, I don’t suggest buying it here underneath this resistance, because there’s a higher probability of resistance and an intraday pullback. So, this is not your best opportunity to buy it. The best opportunity to buy it would be on a dip lower, likely all the way back down underneath the 0.9000-level, into the upper-0.8900s. The yellow-shaded area that you see down here towards the bottom or just underneath the current market price.
So, I wouldn’t suggest buying it right now. It needs to dip back into support or potentially break out above the pink-shaded area. Let’s go ahead and zoom it in here. We could see all these levels a little bit better once we zoom in. There’s our little yellow-shaded area here, down into the mid to upper-0.8900s. There’s the pink zone. Actually, let’s go ahead and take it even further down to the 4-Hour Chart. And as we get down here to the 4-Hour Chart, I’ll actually zoom it back out.
We could see the resistance here into the pink zone. Historically, it’s accurate resistance. Staying underneath the 0.9050 to 0.9080-level, I expect there’s potential resistance intraday pullbacks as we look for the market to come back down into support. Any challenges back lower again could see even back down towards the yellow-shaded area as our next area of support again. Any breakout above the pink zone, of course we’ll look for it to continue higher.
So, here’s the opportunities for the day today. Staying within or under the pink zone, as we have observed back in the past on the left-hand side of the pink-shaded area, we look for resistance, possible selling opportunities, lower risk opportunities to sell it. We look for it to go back down on an intraday basis. The risk in that scenario is that it breaks above the pink-shaded area, which it hasn’t done for several months, above 0.9080 and continues to pressure higher. That’s the risk.
Buying right now, I think, is higher risk. I think if you were to buy it right now, you’re running the risk that it continues to find resistance and falls back, and your stops are much larger, likely down there into the yellow-shaded area. So, the lower risk, higher reward option today would be for selling into the pink zone, looking for a pullback. Then, once it pulls back, you can begin looking for a new buy.
All of that changes, as I’ve mentioned, on a breakout above 0.9080. Open and close above 0.9080 – the .382 fib from the previous downtrend sitting there at 0.9078. An open and close above the pink-shaded area, then you can begin buying again as it presses higher into the 0.9100s. But for the time being, holding off on buys until it pulls back into support or breaks above the pink-shaded area. More likely today, your opportunity is for selling into the pink zone, looking for a turn back lower for the AUDUSD today.
