Last week’s analysis ended with this prediction:
"Right now it can only be said that shorts at around 0.9060 and/or longs at around 0.8890 look like the best opportunities. The level at 0.9060 is a little more comfortable as it is support turned into resistance, which tends to be reliable.
Another factor to consider about this pair over the coming days is that USDJPY looks like it may be breaking out of its summer triangle, in favour of the USD. If the focus switches to USDJPY and this breakout is confirmed tomorrow when the US returns from its holiday weekend marking the end of summer and the start of serious trading, this could mean a sharp move down, if this happens after we reach 0.9060 then that could be a short trade to hold onto for a while."
This prediction did not work out so well; a short off 0.9060 would only have given about 20 pips. The price never returned to 0.8890 and action has been strongly bullish ever since, with a brief pause in momentum as price hit the resistance levels at around 0.9200, as we can see from the daily chart below:
Looking to the future, let’s take a look at the weekly chart:
This weekly chart shows that the down trend is over and we appear to be building a bullish base. Last week was a strong bullish reversal candle, and this week we have already broken the high of the bearish reversal candle of three weeks ago at 0.9233. Things are looking bullish, however we have this very strong zone of resistance just above from 0.9287 to 0.9343, so the bullish move might not have much further to go right now. In fact, this morning the price has fallen quite sharply after hitting the first resistance level of 0.9287, which it penetrated by only 1 pip.
Let's drop down to the daily chart again for another look:
This doesn’t add so very much except to emphasise the recent bullishness: there were two bullish reversal candles last week and only one day with a bearish close since 2nd September. One interesting thing that does come out is that last week’s high of 0.9216 may now come to act as near-term support, having been broken as resistance yesterday after a small battle.
Overall, bullish momentum is strong, but the resistance zone overhead is very heavy and is probably going to take a few attempts to break. If and when the price finally clears 0.9350, the psychological impact for market bullishness on AUD is going to be very big. In the meantime, there should be some good shorting opportunities, maybe off 0.9287 tomorrow or on future days (the longer until it is tested again, the better). Not far above that 0.9317 and 0.9337 are also probably going to give up some short pips if handled correctly.
In the very short-term, 0.9216 could be a good level for a long with a conservative profit target. A more productive long might arrive off a bounce at 0.9070 – 0.9055 which has switched from support to resistance and hopefully back again, it was also a weekly high and did not break last week without a fight. Should price break strongly below 0.9055, it will be hard to remain bullish. However, the support from 0.8845 to 0.89 looks very strong and would be a great place for another long, even if we do go back down there.
Right now, this pair can be seen as the heart of forex action, although that award should really go to USDJPY. This is because the resistance and support levels have been well respected, giving great trading opportunities. In particular, the heavy resistance overhead from 0.9287, is very likely to give traders some great opportunities to make money. The potential support at 0.9070 also looks very tasty!