Hello Forex Traders,
Last week the USD data release was a wide mix: the NFP result was poor and lower than expected, however the unemployment rate fell by a large figure of 0.3% from 7% to 6.7%.
In general, the sum news had a bearish impact on the U.S. Dollar as the EURUSD, GBPUSD, AUDUSD went into higher ground, and the USDJPY sank downwards despite its uptrend. Especially the AUDUSD recovered strongly.
The difference between the AUDUSD and EURUSD upside gains last week translated in a big wick on the weekly chart on the EURAUD. Could do the Euro zone difficulties with a recovery be the cause of this EURAUD struggling? Here below is the analysis on the EURAUD and AUDUSD.
The big wick 4 weeks ago on the weekly chart was already perhaps a first early warning sign. Two weeks ago a bearish engulfing weekly twin certainly put the bullish aspirations in the freezer – at least temporarily. And last week certainly gave no signals for any change as the big wick on top of the candle indicated selling pressure.
The uptrend should not be something that is underestimated. There was a tremendous uptrend of 1,5 years and 4,000 pips and the “law” of trend versus support & resistance predicts that the next higher low could easily form at the next Fib and that there should still be next lower high before larger downside occurs.
However, the bearish price action is occurring at an interesting confluence of resistance (red) and the -18% Fib target. Price certainly seems to be struggling with the continuation of the uptrend and the bearish momentum, could push price down for a deep retracement until the 61.8% and 78.6% Fibonacci retracement levels before support kicks in.
For the moment though, the wide open spaces seems to be below or above the triangle:
1) Downside: below the lighter green horizontal level.
2) Downside: between the lower green level & 38.2% confluence and then next 50% Fib.
3) Upside: above the resistance trend line (purple) up to the next resistance level (red).
The Aussie is also posting bullish weekly candles versus the U.S. Dollar. Last week’s candle was the 2nd bullish candle in a row. But this was also the 3rd weekly candle in a row which saw failure to break the bottom and make a lower low.
The bounce up occurred at the previous bottom which was posted in August 2013. Perhaps too early to tell (for a full confirmation), but this increases the chance of a double bottom. Currently it is difficult to predict how long the upside recovery can last, but obvious resistance levels are the Fibs (blue and green).
On the daily chart it becomes obvious that price was able to break out of its well built down trend channel. Price has also confirmed weakness and posted higher lows in the meantime, but it has also reached a potential resistance spot: 23.6% Fib and top of the trend line (purple). A break above this level should indicate an upside breakout opportunity for price to continue to the next Fib level: 38.2%.
Hope this helps with your analysis and discretionary trading. Always make sure that your trading plan is well prepared!
Thank you for reading and sharing this article and good Trading!
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