AUDUSD gave us a textbook retest of former channel support (new resistance) on Monday and closed below the 0.6870 key level on Tuesday.
I mentioned how the 0.6870 level was critical for AUDUSD last week.
We also looked at a potential head and shoulders pattern that would confirm with a daily close below 0.6870.
And if you saw last weekend’s forecast, you heard my warning about last Friday’s bullish-looking candle.
I was hesitant about Friday’s bullish candle for three reasons.
- It occurred on a Friday when volume tends to be lower
- Friday’s candle formed in a range, making it less reliable
- AUDUSD was trading below the November channel
Sure enough, we saw AUDUSD lose 0.6870 on Tuesday, and sellers are following through today.
I expect a bounce from Friday’s low, but I’m staying bearish on the Australian dollar while below 0.6870 on a daily closing basis.
As mentioned last week, the next key support area for AUDUSD is 0.6600 to 0.6640.
That’s also relatively close to the head and shoulders measured objective.
That said, the last thing you want to do is chase the market lower, as that’s almost always a recipe for disaster.
If you missed Monday’s retest of the former channel support at 0.6920, it might be best to wait for some consolidation before entertaining a position.
As always, that’s my opinion and should not be taken as financial advice.