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AUD/USD: Consolidating, Bearing Bias

By Adam Lemon

Adam Lemon began his role at DailyForex in 2013 when he was brought in as an in-house Chief Analyst. Adam trades Forex, stocks and other instruments in his own account. Adam believes that it is very possible for retail traders/investors to secure a positive return over time provided they limit their risks, follow trends, and persevere through short-term losing streaks – provided only reputable brokerages are used. He has previously worked within financial markets over a 12-year period, including 6 years with Merrill Lynch.

Last Monday I ended my analysis with this:

"The signs are bullish, but the strong resistance overhead is going to take more momentum to be broken. If there is a bearish reversal off any of the points of resistance overhead, it could be possible to take a short off that.... The trend lines would be a good target to take profit at any short. This would also be a good area to go long if there is a strongly bullish bounce there.

It will not be safe to take a really decisive long until 0.9344 is decisively broken to the upside. Nor will it be safe to take a really decisive short until 0.9057 is decisively broken to the downside. Until either of these events happen, be cautious and conservative in trading this pair, and keep a bullish bias."

I was mistaken in being overly bullish and not seeing that the short had already come at the time of writing, off the resistance at 0.9220. Let's take a look at what happened on the daily chart:

AUDUSD Daily


The day of my prediction saw a strong bearish reversal candle off the resistance at 0.9220. It easily cut through the trend line that had been broken earlier as it fell strongly for another two days. Late last week it found support at 0.8930, and has now come back up to retest the trend lines.

Let's take a look at the weekly chart:

AUDUSD Weekly

Last week was a bearish reversal candle, but it has a pretty large lower wick so it is not strongly bearish. Looking at the bigger picture, while the trend remains broadly downwards, we are entering some kind of conslidation zone, suggesting the price could remain in this area for a while.

Turning back to the daily chart, it is hard to see any signs that point to future direction apart from a general bearishness. The only real new developments are weak resistance overhead at 0.9057 (this was support that has become resistance which is promising), and support at 0.8930:

AUDUSD Daily

It looks like the better trades will be on the short side, I have given up on a true bull reversal for the time being. In any case it looks quite likely to consolidate for a while so there many not be any really good opportunities for a while.
I recommend that traders for the time being look for longs off bullish price action at 0.8930 and shorts off bearish price action at 0.9057.

I doubt that the trend lines are going to be much use to us any more. However if the price action respects the trend line and won't break above it during the next few days, that would re-establish the lines as important.

Adam Lemon
About Adam Lemon

Adam Lemon began his role at DailyForex in 2013 when he was brought in as an in-house Chief Analyst. Adam trades Forex, stocks and other instruments in his own account. Adam believes that it is very possible for retail traders/investors to secure a positive return over time provided they limit their risks, follow trends, and persevere through short-term losing streaks – provided only reputable brokerages are used. He has previously worked within financial markets over a 12-year period, including 6 years with Merrill Lynch.

 

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