The AUDUSD just did something fairly unconventional in the world of technical analysis. Instead of testing a broken channel shortly after breaking out, the pair waited almost two weeks before doing so.
Not only that but it’s also retesting the former support level 40 pips above the ascending channel top. Typically we see a retest of this sort occur below the high of the channel. In the case of the AUDUSD, that would have been below the May 23rd and 25th highs near 0.7515.
We first discussed the 4-hour channel below on May 23rd.
Now, whether today’s retest at six-week highs is a sign of strength or just an anomaly is yet to be determined. Given the increase in FX volatility over the last few weeks we can’t and shouldn’t rule anything out.
I should also point out that the AUDUSD has had a tendency to move in short counter-trend bursts. Look no further than the price action since March of this year, so a sharp reversal here isn’t out of the question.
Moreover, at 130 pips so far this week buyers have stretched themselves quite thin, and it’s only Wednesday. That’s a range we’d commonly see from a five day week, not two and a half sessions.
Given the above, I’m skeptical as to how far buyers can push current prices before giving in to selling pressure. And if the latest 4-hour bearish rejection from former channel support is any indication, we may have just witnessed a near-term top at 0.7566.
Upcoming event risk includes Australia trade balance at 9:30 pm EST followed closely by the same from China.
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