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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