We’re finally starting to see some volatility trickle back into the market. Today saw several currency pairs make moves that at first glance may look opportunistic, but a more prudent strategy may be to wait it out. This is when focusing on raw price action can help separate a potentially great setup from one that might get you in trouble.
I mentioned yesterday that GBPAUD was looking constructive and that the 1.822 level may not hold. It didn’t take long for this to play out as price has just closed above the key level.
Also notice how the pair has recently broken to the upside of the trend line from January of this year. We’ll have to see if the market has the legs to reach the 1.84 level this week
I also mentioned GBPCAD yesterday. Today’s price action was almost an exact replica of yesterday’s. The pair closed the day above the 1.84 level which has acted as an area of support and resistance in the past.
At the moment, price action is looking constructive for a retest of recent highs at the 1.856 level. We may see a retrace to 1.84 before the market is able to push higher. In which case we can look for price action buy signals on the 4 hour chart.
AUDUSD formed a bullish pin bar today at a key level. This comes after yesterday’s extreme move and break of the uptrend from January of this year. Although today’s pin bar is well-formed, it isn’t trade-able for me. Here’s why…
After a strong move down like we had yesterday, today’s bullish pin bar looks more like a trap than a great setup. This is especially true when you compare today’s range to yesterday’s range. Today’s bullish pin bar was formed within a range of about 45 pips while yesterday’s drop was formed within a range of about 90 pips.
All of this tells me that we may see a slight push higher but I don’t see this market gaining much traction from here. We could see near term resistance in the .9280 area come into play later this week.
To give some perspective, below is a chart of the AUDUSD monthly chart.
In terms of potential future setups, I actually like AUDJPY better than AUDUSD at the moment. AUDJPY also formed a bullish pin bar today. But just like AUDUSD, I would rather wait for a potential retrace to get short rather than try to squeeze out a few pips from a possible move to the upside.
The chart below shows a clean break of the uptrend from January. If price is able to get back to the 94.50 level, a bearish price action signal here could prove interesting. At the moment, a bearish setup on AUDJPY might have more room to the downside than a setup on AUDUSD.
Similar price action can be found on AUDCAD.