- AUD/USD is trading in a tight range in the middle of a multi-week range.
- The pair is in a sideways trend that is expected to extend.
- The volatility contraction may be a harbinger of great volatility to come.
He AUD/USD has started trading in a mini range within a range on the 4-hour price chart. The pair has been sideways since mid-May, but since June 19 the buying and selling waves have narrowed even further.
AUD/USD 4-hour chart
AUD/USD could move both up and down within the range. A break above the mini-range high at 0.6679 would likely indicate a continuation to the range top at 0.6709. Likewise, a break below the mini-range low at 0.6625 would likely lead to a move towards the range floor at 0.6590.
The short-term trend is sideways and as long as the price stays within the limits of the range, it will probably continue to extend within the range – “the trend is your friend” after all.
Eventually, the pair will break out of its range and the move will probably be very strong, as it is a general rule of the markets that periods of low volatility like the current one are followed by periods of high volatility.
A breakout to the upside is modestly more likely because the trend before the range formation was bullish.
A decisive break above the range top would see a continuation towards a conservative target at 0.6770. On the other hand, a decisive break below the range floor would indicate a continuation towards an initial target at 0.6521.
A decisive breakout would be one in which a longer-than-usual candle breaks the range and closes near its high or low, or three successive candles of the same color cleanly break the top or bottom of the range.
Targets are generated using the technical analysis method of extrapolating the height of the range by a Fibonacci ratio of 0.618 higher (in the case of an upward breakout) or lower (in the case of a downward breakout). A more generous goal would come from extrapolating the full height of the range.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
