Our previous analysis last Wednesday ended with the following predictions:
1. Unclear picture as to what will happen over the coming week
2. Maintain bullish bias
3. If price holds up above 0.9527 then it should rise to 0.9600 or even 0.9643
4. If price does not hold up above 0.9527, likely to fall to 0.9400 where it will be very likely to find support
5. Break below of 0.9400 will indicate bearish bias
These predictions worked perfectly as a trading map over the coming week. The same day, the price closed at 0.9540, then made a low the next day at 0.9526 before taking off upwards, reaching a high of 0.9756 last night. The only weakness of the forecast was in not being bullish and ambitious enough. The identification of 0.9527 as the pivotal level was dead right, as can be seen in the daily chart below
_adam.jpg "AUDUSD Daily")
Turning to the future, let's start with a look at the weekly chart
This weekly chart shows that last week formed a strongly bullish candle, closing hard on its high. However a zone of strong resistance was reached early this week at around the 0.9700 zone, which is a confluence of a few weekly highs and lows and also the 50% Fibonacci retracement of the strong downwards move that occurred from March to August earlier this year.
Let's get some more detail and take a closer look at the daily chart
Action has been solidly bullish for more than a week, with 0.9527 being established last week as strong support. However we have approached the confluent resistance zone mentioned earlier. Yesterday made a weak bullish reversal candle, but note yesterday's and today's bearish wicks sticking through the 50% retracement.
At the time of writing we are still in the first half of the London session, however it is interesting to see that today is currently printing a bearish reversal outside candle that threatens to close hard on its low. This might signal a great short opportunity.
It would make sense to take at least a partial exit of any longs that are still open, because it is likely we are going to need some time to break through this confluent resistance, if at all.
Should today close near its low and below 0.9650, that would be a very bearish sign, and longer-term traders trading off the daily chart could go short at a break of the low tomorrow.
A pull back to 0.9527 would be a good place to look for a long trade, the exact nature of which should depend upon the momentum of the price if and when it arrives at that level.