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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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Yesterday I included the AUDUSD in the weekly commentary for the first time in several months. The Australian dollar has been confined to a relatively “messy” range since mid-June making conditions less than ideal.
A look at another Australian dollar pair, the AUDJPY, shows an even broader range that dates back to March of this year.
If you recall from yesterday’s weekly commentary, the range on the AUDUSD was approximately 140 pips and lasted for four weeks. However, the AUDJPY has been carving an impressive 400 pip range for the last five months.
Not only does a range of this size allow for more room to run while consolidating, but it also offers greater potential once broken.
You see, a market will often travel a distance equal to the height of the range once the breakout occurs. So if the distance between 80.60 support and 84.50 resistance is 390 pips, we can measure 390 pips below 80.60 support to find a potential target.
It just so happens that the November 2016 U.S. elections low is 76.85. It may vary from broker to broker due to the high levels of volatility during that session, but that’s the general area.
The distance from 80.60 range support and 76.85 is 375 pips. That’s only 15 pips away from the 390 pip target I discussed above. And you better believe the market will be paying close attention to that November 2016 low when we get there.
All that said, keep in mind that nothing is confirmed until the AUDJPY closes the day (New York 5 pm EST) below support at 80.60. As it stands now, the daily close is still six hours away which means the level is still serving as support.
As long as buyers hold 80.60 support on a daily closing basis, this 390 pip range is intact. On the other hand, if sellers force a sub 80.60 daily close, the area would become new resistance and would, therefore, attract additional selling pressure.
Key support below 80.60 comes in at 78.90 followed by the November 2016 low at 76.85.
Last but not least, be sure to mind the mean. The AUDJPY is currently more than 100 pips below the 10 and 20 daily EMAs, which means we could see additional strength or at least some consolidation before the next leg lower materializes.
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