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AUDUSD Reversal Pattern Emerges at Three-Year Resistance

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The last time I mentioned AUDUSD, the pair was trading at 0.7580 ahead of Tuesday’s RBA rate decision. Less than 72 hours after the central bank took center stage the Aussie traveled 150 pips higher to retest a level that extends from the April 2013 high at 1.0581.

The weekly chart below illustrates the two patterns we’ve been tracking for quite some time.

AUDUSD weekly

Although yesterday’s session extended beyond the resistance level by 40 pips on an intraday basis, a flood of offers above 0.7690 had buyers in full retreat by the afternoon. The resulting bearish engulfing pattern on the daily chart could be indicative of things to come.

Not only did AUDUSD carve out a 100 pip bearish engulfing candle, but it also closed the day back below the 0.7650 handle. This area acted as resistance in late June and mid-July and later served as support for a brief period in the middle of August.

Yesterday’s close combined with the reversal pattern at three-year resistance makes for a compelling argument to be bearish going forward. And let’s not forget that the level in question is part of a multi-year downtrend.

Of course, those who need a bit more evidence before putting money on the line can wait for a close below ascending channel support near 0.7450. Such a break would open up the floodgates and expose the current 2016 low at 0.6827.

For now, though, we’ll need to take this one day at a time. It’s a well-known fact that September often brings with it higher levels of volatility. Whether that’s good or bad depends on how you approach trade setups and of course, the way you control risk along the way.

Want to see how we are trading this setup? Click here to get lifetime access.

AUDUSD bearish engulfing

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6 comments
Radu says

I’ll trade this as follow:
Sell limit order @ 0.7670
SL @ 0.7740
Target @ 0.7540
Other intermediate targets for scale out :
0.7615, 0.7604 , 0.7585, 0.7570
Good luck.

Reply
    Radu says

    Deleted for the moment. I’m in sell NZDUSD wait to close @0.7375 1/2 R:RW , and I’ll wait for the AUDUSD on US session.

    Reply
Shaon Bhuiyan says

Same View here Justin, But I will be short from below .7490 (only If I get solid double pulse) there is a H & S forming. But I am overall bullish in Long term view.

Reply
Roni Benyamini says

“Aussie traveled 150 pips higher to retest a level that extends from the April 2013 high at 1.0581.”
From your comment above. Isn’t a mistake on your part?

Reply
    Justin Bennett says

    Roni, nope, April of 2013 topped out at 1.0581. That’s where the three-year resistance level starts.

    Reply
Steven West says

A shame I cannot attach a chart but even looking at the Monthly chart there is a trendline very much in play which is being tested. Also price is pressuring the 20EMA. Overall trend is definitely down so we should be bearish if we are trend traders. There are key levels on the Weekly and Monthly charts which are key at the minute. The big boys will lie in wait at these levels with their orders set. I am on the sidelines here until something appears. Safe trading to everyone

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