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I’m going to get started today on the Australian Dollar versus the US Dollar [AUDUSD]. Starting here on the Daily Chart, I want to point out some things in the past first, and then we’ll come to the current timeframe.
If you go back here to the left-hand side of the chart, the first thing I want you to see is the previous uptrend Fibonacci levels that we have here on the chart. You go back here, bottom left-hand side of the chart, all the way down here into the mid-0.8600s. Drawing Fibonacci from there to the current resistance high that we see up here towards the 0.9500-level. The most interesting thing about that is the .618 Fibonacci retracement level. In fact, let me take this other fib off so we can see this a little bit easier. The .618 fib sits at 0.8982.
0.8982. Why is that important? Well, that’s the bottom of this blue-shaded area. The bottom of the blue-shaded area is the .618 fib of this previous uptrend. That’s very interesting. Then you follow that blue-shaded area, again, back to the left-hand side. Left-hand side of that blue, vertical line, you could see historical area of congestion, support, resistance, resistance, support all along that blue-shaded area.
So, we know now Fibonacci and historically that somewhere between the 0.8980s and the 0.9030s, which is that blue-shaded area, historically has support and resistance and congestion, and we also see that the .618 fib of that previous uptrend sits there into that blue-shaded area. Now you take that back to current time and you could see that’s where our current major support is, and we talked about that during yesterday’s Trade Room; that our support was into the blue-shaded area.
And as long as it sat on top of that blue-shaded area, we would be discouraged to sell it. We don’t want to sell it when it’s sitting on top of support. We’d prefer a rally into resistance, and we talked about that during yesterday’s Trade Room. So, we take that. Now let’s look back along this pink-shaded area. Again, don’t worry about what’s happening right now. Go back to the left-hand side and take a look at history. You can see history shows you that along that pink-shaded area you see resistance and congestion back here, all the way back in 2013.
Then you go over here a little bit into 2014. You could see resistance before finally breaking out and going higher. Resistance for several days underneath that pink zone. So, we know that that pink-shaded area historically, again, to the left-hand side of the blue line has historically been support, resistance, and congestion. You bring that back to the current time and we can see now that yesterday and now today currently finding resistance underneath it. So, we can see that, and let’s put an arrow here. So, we know that this is a resistance and down here is support.
So, the trend. Let’s talk about trend. Previous uptrend. We just talked about that with the Fibonacci. Currently we’re in a downtrend. So, if you’re looking to trade in the direction of the trend, which currently is a downtrend, the Forex Black Book trend bar at the very bottom of the chart is red, which implies a downtrend. There’s all kinds of reasons we could say that this is a downtrend. If it’s in a downtrend, our best opportunities to sell it are going to be rallies into resistance. So, we already know where that resistance is. We knew it yesterday before it went up there.
In the Trade Room we talked about 0.9100 or so, into that pink-shaded area being a better opportunity to sell the AUDUSD. So, if you took a sell there, which you definitely had an opportunity to do that since yesterday. If you took a sell into the 0.9100-level, you’re now sitting with 35, maybe 40 pips, depending on where your entry was for the pink-shaded area. Let’s take this down. Let’s zoom it in a little bit more. Let’s qualify this pink-shaded area as a historical support and resistance and retracement level.
Let’s take Fibonacci from this high right here, just the last high that we see, down to the current low. Let’s take Fibonacci there, and we find that the .236 fib of that range sits right here and it’s overlapping with the other fib there, but it’s right here at 0.9080. So, 0.9080. So, just ahead of that pink-shaded area was that overlap of fib. So, again, even if you sold it there, you’re now seeing some profit as it starts to work its way back down. The best opportunities to sell within a downtrend are selling on rallies into resistance.
And one more fib. Let’s take it from the highest high, all the way up here at the top, down to the current low. And doing that we find the .236 fib sitting at 0.9106. So, again, between 0.9080 and 0.9106 was the opportunity to sell on a rally into resistance. Well, if you missed it, if you didn’t do it, I still think that that’s the area to watch. Risk reward-wise that becomes the best area to watch. The pink zone, just above the 0.9080 becomes the area to watch because your risk is a breakout above here. So, you know what the risk is. You know that if it breaks above 0.9130, you probably don’t want to stay in a sell any longer.
If you go back, again, to the left-hand side of the chart, zoom it back out. What happens when it gets above the pink-shaded area? It’s clearly telling you that if it gets above the pink-shaded area, it’s going back up again. So, if you’re selling, your risk is that it breaks that pink-shaded area. Zoom it back in here and we can see as long as it stays underneath there, you’re selling rallies into resistance and you’re targeting the blue-shaded area. If you’re already in a sell, you’re targeting the blue-shaded area. Your next clue that the trend will continue will be a breakout under the blue-shaded area.
So, these two areas, blue and pink, will be your main areas of focus today for the AUDUSD. Let’s take it down to the 4-Hour Chart. Not going to change it any at all, but you could see that pink-shaded area there. A little bit more detail. We talked about the rally into resistance and selling opportunities yesterday. If you took a sell, you’re already in profit. You’re targeting the blue-shaded area. Buyers, if you’re buying, if you’re looking for a buy, I think you’re not doing that until it reaches our support, which is down here in the blue-shaded area. If you’re looking to buy this, watch for opportunities down closer towards the 0.9030-level, down on top of that blue-shaded area.
We already know that’s support. So, clearly if you’re looking for a buy, that becomes your best lowest risk, highest reward opportunity to buy it. So, buying the blue zone, selling the pink zone, depending on which direction you’re trading. And of course trading in the direction of the trend, which is a downtrend, is still the main focus for this currency pair, until something changes, but these two areas here will be your main areas of decision for the AUDUSD probably for the rest of this week.
