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Transcript of Video
I’m going to get started today on the Australian Dollar versus the US Dollar [AUDUSD]. I’m going to start all the way out here on the Weekly Chart. Get a longer-term perspective for this currency pair because it has been falling for the past several months and it is falling into historical support lows, where we haven’t seen for quite some time. The last time we’ve seen the market into these support lows that we’re into right now is all the way back here to the left-hand side of the chart, into 2010.
You see right here, where the crosshair is, we see the bottoming out low, down around the 0.8300-level, but just above there, support seen into the yellow-shaded area. See a little bit of congestion here, when it got underneath that 0.8300, 0.8400-level and moved all the way down here into the green-shaded area, into the mid-0.8100s. Follow it a little bit further back. You could see some historical resistance in that same yellow-shaded area, so that’s going to be a key point for the current market or today.
As long as we stay above that yellow zone, like it did over here on the left-hand side, we could look for it to go back up. If it pushes under the yellow zone, as we see over here on the left-hand side, it goes all the way back down here to the green zone, into the mid-0.8100s. So, that yellow-shaded area will be a key point over the next several days for the AUDUSD, so that’s really the reason we came out here to the Weekly Chart. Now let’s just scoot the chart over and you could see over here on the right-hand side of the chart. You could see that’s where our current support low is. That’s the lowest low that we’ve seen over the past few days here for the AUDUSD.
Take it on down to the Daily Chart. You could see there’s that same yellow-shaded area between 0.8435 and and 0.8395, the yellow-shaded area at the very bottom of the chart holding our support. Just above that, the blue zone. I have it highlighted with this red, horizontal line, the bottom of that blue zone because this is going to be a key player for today as resistance. Clearly this currency pair of course has been in a downtrend. So, within a downtrend, we want to look for selling opportunities into resistance. As it rallies to resistance or breaks underneath support, we look for selling opportunities in the direction of the trend, and that will continue until we see a change of the trending pattern.
Right now the trending pattern is lower highs and lower lows. So, until that changes, we’re going to continue to focus our efforts in the direction of the trend, selling on rallies into resistance. Now, of course, fundamental news and data could influence the currency pair and drive it through certain levels, but we’re going to continue to focus in the overall direction of the current trend. So, today that would be selling the blue-shaded area, so let’s go ahead and put an arrow right here. If we were to go back in time, we could find around the 0.8500, 0.8530-level. We could find some historical support and resistance and congestion along that blue zone. We’ll do that later on in the Trade Room today, but that’s our area of resistance for the day today.
If we break through there, the next area for resistance is all the way back up here into the 0.8600-level. The red trend line, the blue trend line, the orange-shaded area. So, clearly, if you decide to sell the AUDUSD today in the blue zone, your risk is just above it. Maybe 0.8535, 0.8540. That way, if it breaks above the blue-shaded area, you have limited the loss and you’ll wait for it to challenge back up here into this area and then you sell it again in the direction of the trend.
Buyers right now not really interested in this currency pair. There’s really only two reasons I might consider a buy and looking for clues to reversal. Of course that would be, first off, looking for candlestick formations or patterns of reversal. Higher highs and higher lows, maybe a hammer candlestick, an engulfing candle – something of the sort that tells me it’s reversing. I don’t think we see anything like that. The other thing would be of course a break above our current resistance. A break above the blue zone, we look for it to start working its way back to the red trend line.
Another reason that you may look for a buy would be at the very lowest low. There could be definitely support above 0.8400 and provide the low risk, high reward scenario. So, the blue zone is kind of that hinge point today, around the 0.8500-level. Breaking above it, we go higher. Staying underneath it, we look for the market to still stay in the direction of the trend and continue to go lower.
Take it on down to the 4-Hour Chart and we see a little bit of a gap from the weekend. The market closed last week right up here, around the 0.8500-level and opened up a little bit lower. Took a dive down towards the 0.8400-level and now that gap has been satisfied as the market has come right back up into the 0.8500-level. That blue-shaded area, again, is kind of that hinge point that I just talked about a few moments ago on the Daily Chart. So, let’s bring our arrows a little bit closer now here on the 4-Hour Chart. This is our zone of decision for today, and I talk about that quite a bit in the Trade Room on a daily basis.
All these highlighted, shaded areas that I put on the chart. All they are, are highlighting zones of decision, where has the market historically been entering and exiting. Historically, over the past week or so, we could see that the blue-shaded area was a place where sellers exited and buyers entered. That creates that boundary of support. Once it breaks through there, that same boundary of support then becomes a boundary of resistance and it becomes an area where buyers might exit and sellers enter in the direction of the trend.
You could see that. Just look to the orange-shaded area. The orange-shaded area was an area of support, where sellers exited and buyers entered. Sellers exited. Buyers entered. And then eventually it broke underneath it, the same orange-shaded area became an area of resistance, where buyers exited and then sellers entered. So, just in the same way this orange-shaded area was support, then resistance, we’re now looking for the blue-shaded area to be support and now resistance here for the day today on the AUDUSD.
Forex Black Book trend bar is red. Of course all that does is tell us the direction the current market is going in. We don’t really need to see that because it’s been creating lower highs and lower lows. Now, there’s several different ways we could draw Fibonacci on this chart and I’m just going to do a few of them just so we can get an idea of what I’m looking at. In fact, I’m going to take the current one off of here and let’s draw a few Fibonacci levels.
I’m just going to go, first off, to the high of the blue trend line. That highest high on the chart, down to the lowest low. That puts the .236 at 0.8537. That’s one interesting Fibonacci we might look at. 0.8533 actually now that I connect it to that low. Let’s take Fibonacci from this high right here, down to that same low. In doing that, we find the .236 at 0.8504, bottom of the blue-shaded area. What we’re looking for is where Fibonacci begins to overlap. We’ll do it from here. This high, down to the low. And we’re starting to see. Right around this blue-shaded area, we’re starting to see some overlaps in Fibonacci. And we’ll take one last one from this high, down to the low. Again, Fibonacci, as I discussed in the Trade Room many times, is a subjective tool to your vantage point and to the viewpoint that you’re taking of the current market. Timeframe. Zoom level.
All of that is going to be subjective to Fibonacci, but when they start to overlap on top of each other, as we could see very close to the bottom of the blue zone, inside that gap, very top of the blue zone. So, when they start to overlap on top of each other, that’s when it gives us higher confidence, as a specific, naturally recurring barrier using Fibonacci tool. So, the blue zone is our clear decision zone. Fibonacci tells us that. Historical support and resistance tells us that. So, bottom, 0.8500 to 0.8525 is the blue zone. Selling into that resistance, targeting the last support, which would be the yellow-shaded area. Stop losses above maybe 0.8535, 0.8540. That way, if it breaks above the blue zone, we’re looking for it. I mean just take a look at Fibonacci. If it breaks above here, we go back here into the upper-0.8500s, if not all the way to the orange zone, where we see historical support, resistance, and some Fibonacci, and again, trend lines come into play as we push closer towards the orange-shaded area today.
So, selling into the blue zone, targeting the yellow zone. A break above the blue zone, we could target back towards the orange-shaded area today for the AUDUSD.
