Daily Price Action
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AUDUSD Bulls Cling to Key Support

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The AUDUSD came close to breaking key trend line support during yesterday’s session. But buyers made a stand in the final hours that appears to have averted the breakdown, at least temporarily.

If you had this trend line just a few pips higher, yesterday’s session would have signaled a break in support. This is why drawing levels accurately is so important.

I know a few of you got caught selling yesterday’s close only to have the market snap back on you. But as it stands, the pair is still hanging on to the level that extends from the June low on a daily closing basis.

One way to avoid getting caught on the wrong side of the market like this is to use a conservative approach to plotting key levels. In other words, opt for the most reliable placement possible.

Draw your levels in a way that leaves no doubt as to whether a market has broken out or not. In the case of the AUDUSD, that means placing the trend line so that it just barely touches the August 31st low.

We can summarize this approach by saying that you should draw ascending trend lines as low as possible. Likewise, you want to place descending trend lines as high as possible.

By doing this, you reduce the odds of pursuing a break that didn’t actually occur.

I’m going to remain neutral here given that sellers have yet to secure a daily close (5 pm EST) below the 0.7960 area. If they do manage such a close over the coming sessions, I will entertain a short entry on a retest of the area as new resistance.

The first target would be the August low at 0.7820 with a break there exposing 0.7730. Alternatively, a daily close above 0.8065 would negate the bearish scenario and expose the current September high at 0.8124.

Keep in mind that we have a Fed rate decision and statement on Wednesday at 2 pm EST followed by a presser at 2:30 pm EST. So, even if the AUDUSD breaks down today, I’ll stand aside to avoid getting entangled in tomorrow’s volatility.

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AUDUSD daily chart showing key trend line

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8 comments
Roy Peters says

This good example of waiting for confirmation of the trendline break. Before putting on a buy or sell position

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Darius says

yea, with tms broker I think I draw line as you said and it showed that trend is broken.Thosebroker do different prices, thats why I got different line imo.

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Elolo says

my trendline shows a break yesterday then i entered today with a retest on H4 timeframe, good lesson about trendlines accuracy

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    felix says

    Every trendline can reset once a new support or resistance level has been formed, that’s why i rely on the daily because it can only reset after the days activities if only a new support or resistance level has been created

    Reply
Thomas says

Hi Justin, wow, I think you are my new trading mentor! I opened a short position with high leverage on the AUDUSD just after it retested old support/new resistance line at 0,7960 on the 1-minute chart, then I reread what you wrote concerning the necessity of retesting key lines on the daily chart and I closed the position with 50% profit just before it brutally jumped up from 0,7916 to 0,7943. I’ll meet this guy again tomorrow morning with lower leverage 😉 Anyway thank you so much for what you do, it’s incredibly helpful!

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    Justin Bennett says

    Glad to hear that, Thomas. It looks like the AUDUSD will confirm the breakdown today. We’ll know in a few hours.

    Reply
      Thomas says

      As I’m Belgian, I’ll probably be sleeping by then… Do you think it would be a smart move to put a sell order now and to set the Take Profit on the new support line or a little bit above (0,7916), since price action has to test this line again anyway before breaking or rising? Would be a nice 300 bucks in the morning! Would you recommend something like that? Or do you find it too risky? Thanks again!

      Reply
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