The AUDUSD has been all over the map so far in 2017. The good news for traders, however, is that the pair has been moving in swings of several hundred pips, providing follow through to those who time their entries right.
Not only that, but the price action for the last 12 months has been relatively easy to read. Similar to the NZDUSD wedge I mentioned last week, the AUDUSD has been consolidating since hitting a multi-year low back in January of 2016.
Just last week, sellers once again flocked to the resistance level that extends from the April 2016 high. We discussed this on Friday as a potential trade idea for the current week.
Overnight, the pair broke below a 4-hour rising wedge pattern that extends from the June low. The formation hints at exhaustion from buyers, and the recent breakdown confirms that sellers have regained control, at least for the moment.
One thing to note here is how wedge support intersects with the 0.7620 handle. This was the location of several highs in June and is also the 23.6% Fibonacci retracement when measuring from the May low at 0.7328 to the June high at 0.7711.
In most cases, I would have watched for a buy signal on a retest of the 0.7620 area. However, trend line resistance just above at 0.7700 combined with the rising wedge in June suggested a different approach.
Instead of watching for a buying opportunity, I was waiting for a close below the confluence of support at 0.7620. In truth, the breakdown occurred much sooner than I was anticipating.
Because today is a U.S. holiday and thus volume is relatively thin, I’m going to wait for a daily close (5 pm est) before making a decision. If the pair closes below 0.7620, I will begin watching for a selling opportunity on a retest of the level as new resistance.
Support levels below 0.7620 include 0.7565 and 0.7515. Alternatively, a daily close back above 0.7620 would keep the rally intact.
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