AUDUSD: The Next Domino to Fall

by Justin Bennett  · 

July 21, 2016

by Justin Bennett  · 

July 21, 2016

by Justin Bennett  · 

July 21, 2016


Yesterday I commented on the NZDUSD selloff that triggered when the pair closed below channel support that extends from the May low at 0.6675. The economic update released by the RBNZ early in today’s session gave rise to additional concern about the kiwi’s lofty prices, which helped the pair shed another 70 pips.

Daily correlation for AUDUSD and NZDUSD As you may well know, the Australian dollar and New Zealand dollar share a common bond. As such, the two currencies often move in tandem. And at a 92.2% positive correlation on a daily closing basis, that relationship is currently stronger than it’s been in quite some time.

This increase in correlation signals that the recent breakdown in the NZDUSD could soon spill over to its Aussie counterpart. In fact, over the weekend I mentioned the bearish engulfing pattern on AUDUSD that triggered this week’s 140 pip drop.

But even if the two currency pairs weren’t correlated, the price structure on the AUDUSD would still interest me. And while the more immediate trend line that extends from the May low at 0.7145 (second chart) is intriguing, there is a larger opportunity that’s been brewing since the January low at 0.6825.

AUDUSD ascending channel on the daily chart

The broad structure above combined with the intraday trend line below could present an opportunity to pyramid on the way down. Of course, we first need to see a close below the 4-hour trend line to help confirm that sellers remain in control.

A move lower would first encounter bids at the six-month channel support near 0.7330. A close below that would expose the May low at 0.7145 with a break there opening the door to a much larger move toward multi-year lows at 0.6825.

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AUDUSD intraday trend line support


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14  Comments

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    1. Right, which is why I made mention of that in the post… “Of course, we first need to see a close below the 4-hour trend line to help confirm that sellers remain in control.”

      Thanks for your comment.

    1. Mark, I do like those words because they symbolize the uncertainty that’s present in any market. To use the words “will” or “will not” would imply that a particular outcome is guaranteed, which we all know isn’t how this business works.

      And you’re right; everyone has the ability to do what I do, which is why I spend much of my day teaching others.

      Thanks for your comment.

    2. I don’t know you, but in this financial markets. Those are the succinct words, anything other than those is blatant lie. The reason, no one of use is 100 percent certain and it shows the level of uncertainty involve in earning a living in this market. Thank your Just for your mature response.

  1. Thanks for the head up. But if the dynamic support line is drawn one weekly TF, we’ll see that it has already broken the line. Thanks

  2. Justin, please ignore the comment from mark johnson. Anyone looking for forex market analysis with guarantees is not only ignorant, but foolish.

  3. Good analysis Justin… You follow NY closings for your charting analysis? Because when you say we need to close below the 4h trendline… we also need to know which closings are you following for this analysis?

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