Bearish Breakdown in the AUD/USD Forex Pair
The Australian Dollar is extremely weak, but it is unlikely to fall much further against the US Dollar today.
My previous signal on January 12th did not trigger because there were no valid reversals at the first touches of any of the support or resistance levels that day.
Short Trade Ideas
- Short after a bearish price action reversal on the H1 time frame, on the next touch of $0.6953 or $0.6993.
- Set the stop loss one pip above the current swing high.
- Once the trade is 20 pips in profit, adjust the stop loss to break even.
- When the price reaches 20 pips in profit, take 50% of the position as profit and leave the rest of the position to run.
Long Trade Ideas
- Long after a bullish price action reversal on the H1 time frame and the next touches of $0.6845, $0.6790, and $0.6723.
- Set the stop loss one pip below the current swing low.
- Once the trade is 20 pips in profit, adjust the stop loss to break even.
- When the price reaches 20 pips in profit, take 50% of the position as profit and leave the rest of the position to run.
The best way to spot a classic "price action reversal" is for an hourly candle to close with a higher close, such as a pin bar, doji, outside candle, or even just an engulfing candle. You can profit from these levels or zones by observing the price action that occurs at the specified levels.
AUD/USD Analysis
In my previous forecast, I stated that the AUD/USD currency pair was trapped between $0.6845 and $0.6953, but that if new US CPI data showed a drop to 6.5% or lower, we would almost certainly see a rise to $0.6953 and potentially a bullish breakout beyond that level, which could be significant.
This was a good call because when the CPI data came in at 6.5%, the price immediately rose above $0.6953, and then fell back to exceed that level over the next few days.
Yesterday, the price reached a multi-month high of $0.7063 before plummeting precipitously. This bearish breakdown is significant and could be significant.
The price chart below shows that the price has returned to a zone of safety, the recent zone of consolidation below the resistance level at $0.6918. The technical outlook is bearish as long as the price remains below that level, but how much further the price can fall is unknown because there is a lot of consolidation and support above the support level at $0.6845, which will likely keep the price up for the time being.
The Australian Dollar is currently in the spotlight because it is the weakest major currency. This drop appears to be unrelated to anything happening in Australia, but rather a barometer of risk sentiment, which fell yesterday for highly debatable reasons. In my opinion, we are witnessing a more natural and deep bearish retracement.
Given our long-term trend against the US Dollar, and the fact that there is unlikely to be much immediate downside movement ahead of us, I see the best potential opportunity here today as a long trade following a bullish bounce at the support level of $0.6845, if it is reached today.
There is nothing significant scheduled for today in terms of the AUD or USD.