The AUDUSD has broken below the key 0.7380 handle on an intraday basis and is fast approaching the lower boundary of consolidation near 0.7300. I mentioned this wedge pattern on March 31st as a top trade idea for April. At the time, the pair was trading above 0.7600.
This particular formation has been developing for the last twelve months following the 4,200 pip selloff between July 2011 and January of last year. As such, it may represent a bearish continuation pattern.
With that said, we won’t have a definitive answer until price breaks the upper or lower boundary on a daily closing basis. Until that time, the pair is considered to be range bound.
The way I see it, there are two ways this plays out from here.
- We get a daily close (5 pm EST) below 0.7380. In which case a retest of wedge support near 0.7300 seems likely. A daily close below 0.7300 would pave the way for a retest of the December 2016 lows at 0.7160.
- Today closes back above 0.7380 thus forming a bullish pin bar in the process. If this happens, there’s a good chance we’ll see a bounce toward the 0.7500 area.
I will admit that the latter doesn’t seem very likely given today’s price action thus far.
Regardless of what happens, the recent downtrend means I’m only looking for selling opportunities for now. I’ll maintain this stance until buyers convince me otherwise.
For now, the intraday charts suggest that we have a new range in play between 0.7300 and 0.7380. Combine this with the potential for a break of twelve-month consolidation, and we have a pair worth keeping an eye on.
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