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Bears target 0.7220, bulls look for a test of 0.7420

  • AUD / USD bears should be on the lookout for the trap.
  • Bullish reversal pattern observed on the daily chart.
  • The bears await the break of the weekly trend line support to target 0.7220.

The AUD/USD it is in the process of an upward correction according to the daily chart and has broken the 38.2% Fib retracement level for the opening day. It settled at 0.7336 and one pip higher than Friday’s highs.

Since then, the price has risen through the 50% mean reversal and has approached a 61.8% Fibonacci test at 0.7323. This is an area of ​​greatest resistance given the confluence of bearish moving averages. At this juncture, bears could start looking for an optimal entry in anticipation of a continuation to the downside.

AUD / USD daily chart

Nevertheless…

… the weekly time frame is not that bearish while there are prospects for the dynamic support to hold and result in a higher high for the next few weeks. Examining the daily chart a bit more closely as well, the November 12 bar was engulfing bullish:

This is actually a three line strike candle formation that is a reversal pattern. Therefore, we could see the playout of the weekly outlook in case the price clears the overhead resistance and rises above 0.7420:

On the other hand, if the weekly dynamic trend line support breaks and the price falls below 0.7320, then the three-line strike will be invalidated as a trade setup and the bears will be in control again.

Bears can still prepare for a continuation to the downside by monitoring a bearish environment from the 4-hour car as follows:

The bears will look for the 21 and 10 EMAs to turn south and cross or signal a bearish environment. A break out of 0.7320 will likely result in a continuation to the downside to a new daily low towards 0.7250 and then 0.7220.

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