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Important: I use New York close charts so that each 24-hour period closes at 5 pm EST.
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The AUDUSD is in the process of testing former multi-year trend line support as new resistance. The level extends from the 2016 low and connects with the December 2016/January 2017 low as well as the December low from last year.
I mentioned the April 23 breakdown one day later in this post. After spending the last six weeks staying (mostly) below the 0.7580 handle, buyers have made their way back to the multi-year trend line near 0.7670/80. This time it’s being tested as resistance.
It’s unclear at the moment what type of bearish price action we’ll see from the area if any. However, as long as it holds as resistance on a daily closing basis (using a New York close chart which you can get here), I’ll stay bearish the AUDUSD.
Key support comes in at 0.7580 followed by the May low at 0.7410. Alternatively, a daily close above this trend line would negate or at least delay the bearish outlook.
That said, you may be aware of my rule about buying upside breaks of ascending levels or downside breaks of descending ones. Essentially, I avoid doing either one.
Why is that?
It’s because a downside break of an ascending level like the one that occurred on April 23 is considered bearish. The market was indicating that buyers were exhausted, and breaks of multi-year levels like this one don’t usually play out in a matter of weeks.
In other words, the bigger picture still suggests that buyers are exhausted. Yes, we have a short-term uptrend, but as long as the 2016 trend line holds as resistance, I’ll approach this as a shift in momentum and continuation of the long-term downtrend that started in 2011.
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