The AUDUSD has jumped above a critical level with today’s rally. The trend line that extends from the May 2015 high comes in near 0.7700 and was respected last Thursday with a bearish rejection candle.
While today’s break of the May 2015 trend line is significant, two things could pose a problem for the bulls.
So far this is only an intraday break.
As you may well know, I primarily trade the daily time frame. So any intraday break, particularly of a two-year level, is inconsequential.
Today’s high hit a significant resistance area.
I mentioned the confluence of resistance near 0.7740 in the February 9th commentary. This area is the intersection of the April 2016 trend line as well as the two swing highs from August and November of last year.
Now, here’s what I need to see before today’s close to suggest buyers have exhausted their resources (for now).
Because the trend line from the May 2015 high held as resistance last week and also capped yesterday’s rally, I need to see the pair close the day back below the 0.7700 handle.
I use a New York close chart, so that means the AUDUSD needs to close below 0.7700 before 5 pm EST. If it does, we could have a short setup on our hands either today or tomorrow pending bearish price action.
And if it doesn’t, I’ll stand aside and wait to see what happens in the 0.7740/60 region.
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