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I’m going to begin the day today on the Australian Dollar versus the US Dollar [AUDUSD]. Starting here on the Daily Chart, a couple of trends we want to talk about. First off, is the previous downtrend, coming up from the highest high up here at the top of the chart, in towards the 1.0600-level. All the way down here towards the bottom of the chart into the 0.8800s, we saw a downtrend with lower highs and lower lows.
Over the past several months though, we’ve seen a change on that trend pattern, where we began to see a reversal and a turn higher, as it began to create higher lows with the last couple of lows being higher and higher highs as it broke above these highs here, into the purple and pink-shaded area. As we saw the break above those highs and new higher lows being made, we look for potential reversal of this previous downtrend and new highs to be made within a newly forming uptrend.
As it reversed from this previous downtrend, it also came up and settled out underneath resistance into the 0.9500-level. That 0.9500-level happens to be the .382 Fibonacci retracement level of this previous downtrend. So, as it settles out as resistance underneath 0.9500, we’ll expect the market to hold underneath there, until we see a breakout and a continuation to the next level of resistance. The next level of resistance above 0.9500 would of course be here, in the mid- to upper-0.9500s, but a continuation through that level, we’re back into the 0.9600s, the top of this green-shaded area, and possibly all the way up into the 50% retracement level of this previous downtrend in towards the 0.9700-level.
So let’s take that information down to a smaller compression, down to the 4-Hour Chart. And of course, as we saw that retracement higher, we began looking for clues to an uptrend. And here, climbing on the 4-Hour Chart from down here into the 0.8800s all the way back up into that 0.9500-level and that .382 Fibonacci retracement level from the Daily Chart, we can see the beginnings of an uptrend with higher highs and higher lows. If we take Fibonacci of the current uptrend, from the lowest low that we see here down at the bottom left-hand side of the chart to the current high, we can see this trend – this uptrend – actually retraced down also to the .382 retracement level at 0.9283.
So, we saw a fall or a retracement against this previous uptrend down to a Fibonacci level – the .382 – and now a bounce off of that as support. So, as long as it finds support above that .382 and the 0.9280-level, there’s potential for this to turn back up in the direction of this uptrend. Well, over the past few days, we saw that fall come back down from the 0.9500-level down into that .382, into the 0.9280s, creating this wedge pattern that we can see here, drawn on this chart with the two blue trend lines. Connecting the highs within this wedge and the lows within this wedge, we could see the market falling within that wedge pattern, and we’ve seen the breakout above that wedge.
As long as it holds above that wedge and above the purple and green-shaded area, I’m expecting a continuation of the previous uptrend. With the breakout to the top side of this wedge, I’m watching for support and opportunities for this to turn back higher in the direction of this previous uptrend. Well, interesting enough is that we see the trend bar for the Forex Black Book is green, showing a bullish trend. We can see on the left-hand side into the longer uptrend, we can see it was bright green as it continued to pressure higher.
Over the past several days, as it’s been within this wedge and falling lower, we can see it turn dark green, because the shorter and longer-term trends were in disagreement, where the longer-term trend is still bullish, but the shorter-term trend was doing down and bearish, and we can see it turning dark green. Now that we see that rise above the wedge and the turn above the last resistance highs, I would expect over the next few days we could see that trend bar turn bright green again, giving us opportunities to buy this. But until then, it doesn’t mean we can’t buy it. We just don’t have that indicator in agreement quite yet.
But if, over the next couple of days, this turns bright green, it will give us opportunities to take buys on any new Forex Black Book signals. I expect today, as long it stays above this green-shaded area, as it has been so far over the past several hours, I would expect for a turn back higher again towards the blue-shaded area, which is our next area of resistance that we can see over the past several days into the low- to mid-0.9400s – 0.9425 to 0.9445. It’s the blue-shaded area. Above that, of course, we go all the way up into the highest high that we’ve seen over the past several days, going back into 0.9500 and the yellow-shaded area. And of course, above that, we look for the continuation towards the 0.9600s.
The only thing that will change that outlook today or at least a short-term change in that outlook would be a break under the green-shaded area. We’re likely looking for a test back down to the current lows, into the purple zone, into 0.9300. And if it, of course, breaks underneath there, we’ll look for a new low all the way back down here to the pink zone.
So let’s go ahead and put a couple of arrows here to give you my expectation today for the AUDUSD. Staying above this green-shaded area and the 0.9350 to 0.9375-level, I would expect it will be looking to go back up towards the blue-shaded area into the mid-0.9400s into the blue-shaded area. So, let’s go ahead and put an arrow here as resistance. So, if it takes a bounce here, 0.9375, the 0.9425 to 0.9450-level is your next resistance higher. If it breaks underneath this green-shaded area and underneath the support seen at 0.9345, likely looking for a turn back down towards the purple-shaded area, which is down into the 0.9300 level today.
So, above the green zone goes back to the blue or the gold zone as your next resistance highs. Below the green zone, going back to the purple-shaded area. It’s my expectation, with the green trend bar with the Forex Black Book, the break above this wedge that I would be focused in on the buy side for the AUDUSD today.
