- 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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