AUDUSD Bear Setup

Hello Forex Traders,

Similar to currency pairs such as the EURUSD and the USDJPY, the USD is showing its strength against the Australian Dollar as well. The AUDUSD has posted its 3rd weekly bearish candle in a row last week and this week’s candle has already broken last week’s low.

Is this a signal that the reversal weekly candle at the top could be more than just a retracement? What do you think – how do you see the AUDUSD?

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THE GOLDEN 50?

Obviously the 50% Fibonacci retracement level of the entire swing high swing low of the most recent down trend is a major and key level for the market. This is a level that will always cause the currency to pause. But the pause is turning into a full fledge reversal – or at least a very deep retracement.

WEEKLY TOUCH

There is still one major support level in play which needs to be broken: the weekly support at 0.9280. No matter how strong trend is, Forex traders should always keep an eye on key levels such as a weekly support because price usually respects them and uses them as “bouncing” spots.

BEAR & BULL SCENARIO

Once the currency has bounced, it will depend on how it bounces to judge the likelihood of the next expected Forex move.

1)      Weak correction – a bearish chart pattern – such as a bear flag or bearish triangle – could be a great confirmation of more downside to come. In that case the weekly support will break and the next major structural support level is the bottom at 0.8850.

2)      Strong correction – a strong rally on the lower time frames might signal the potential of more upside towards the 61.8% Fibonacci retracement. The confirmation of the upside breakout is when price breaks above the current top at 0.9760.

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BEAR LONG TERM

In my opinion the bearish case seems to be more likely. Especially if a Forex trader considers the fact that the EURUSD has made a significant drop recently, that the GBPUSD is right at major weekly and monthly resistance and not breaking it, and the USDJPY is breaking a weekly wedge trend line to the upside.

When looking at the AUDUSD monthly chart, the first thing that is very noticeable is last month’s wick on top of the monthly candle of October.

The other important fact is that the currency has not yet broken last month’s monthly low at 0.9280 (which is equal to the weekly support fractal in fact).

Once the monthly low breaks at 0.9280, then price will challenge the monthly bottom at 0.8850. A break of the bottom could see price extend the down trend to the -618 and -272 target confluence at 0.8340 – 0.8370.

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Do you think that last month’s wick is indeed a bearish price action signal or is it too soon to tell? Do you agree with the above or are you looking for different key levels in your analysis? Let us know down below so that everyone can benefit from multiple views.

Thanks for reading this article – and for sharing it!

Good Trading!

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  • Chris Svorcik

    Hi Molly, thanks for the feedback and comments! That’s great stuff. Good to hear that you see downside in the near future as well. Good Trading!

  • Molly Beckett

    From a fundamental perspective, thanks to China’s good performance ,which is supporting the resilience of the AUD/USD from any downside pressure.
    I agree about the bearish scenario! Thanks for sharing your point of view!