One of the five currency pairs I wrote about on Sunday was EURAUD. What caught my attention was how the pair broke above an ascending channel on September 7th.
As I’ve mentioned before, upside breaks of ascending patterns don’t usually last. In other words, they tend to be false breaks more often than not.
Here’s what I wrote on Sunday:
The pair has recently broken to the upside of an ascending channel. The odds of buyers being able to sustain this type of break are low in my experience. That doesn’t mean the pair will drop, but it is something for us to keep an eye on moving forward.
Fast forward to today, and you can see that buyers were indeed unable to sustain the September 7th break above channel resistance. Yesterday’s session even engulfed the previous 48 hours and nearly erased the last seven trading days.
Sellers have continued to show their dominance so far today. The pair is down another 80 pips from yesterday’s close, so a retest of new resistance near 1.6230 seems less likely now.
However, there is a good chance the 1.6140 level could offer an entry for those interested in a short here. If the EURAUD closes the day (using a New York close chart) below 1.6140, the area should begin to serve as new resistance.
As I mentioned over the weekend, a drop to the confluence of support near 1.5860 shouldn’t be ruled out. You can see that commentary here.
In summary, a daily close below 1.6140 followed by a retest of the level as new resistance will likely attract sellers. Key support comes in at 1.5860 with a minor area near 1.5960.