The last time I mentioned AUDUSD, the pair was trading at 0.7580 ahead of Tuesday’s RBA rate decision. Less than 72 hours after the central bank took center stage the Aussie traveled 150 pips higher to retest a level that extends from the April 2013 high at 1.0581.
The weekly chart below illustrates the two patterns we’ve been tracking for quite some time.
Although yesterday’s session extended beyond the resistance level by 40 pips on an intraday basis, a flood of offers above 0.7690 had buyers in full retreat by the afternoon. The resulting bearish engulfing pattern on the daily chart could be indicative of things to come.
Not only did AUDUSD carve out a 100 pip bearish engulfing candle, but it also closed the day back below the 0.7650 handle. This area acted as resistance in late June and mid-July and later served as support for a brief period in the middle of August.
Yesterday’s close combined with the reversal pattern at three-year resistance makes for a compelling argument to be bearish going forward. And let’s not forget that the level in question is part of a multi-year downtrend.
Of course, those who need a bit more evidence before putting money on the line can wait for a close below ascending channel support near 0.7450. Such a break would open up the floodgates and expose the current 2016 low at 0.6827.
For now, though, we’ll need to take this one day at a time. It’s a well-known fact that September often brings with it higher levels of volatility. Whether that’s good or bad depends on how you approach trade setups and of course, the way you control risk along the way.
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