The Forex market has become more alive lately, with the US Dollar starting to make firm, technically significant price movements, which suggest that change is coming as the greenback is usually the main driver of the Forex market. The Australian Dollar is also in some focus today as Australian CPI (inflation) data was released earlier today, and that is almost always an important driver of how a currency is viewed in the market.
While it is clear that sellers have been in charge for a while, the price is approaching a potential value area, so we may be nearing a pivotal point.
Top Regulated Brokers
The last time the price arrived in its current region, it quickly made a major bullish trend reversal, meaning that the time has come to keep a close eye on this currency pair. The Australian Dollar has historically been a currency that turns around very easily on a chart, but recent years have seen it start to trend more reliably, especially against the US Dollar and the Japanese Yen.
The lower than expected Australian inflation data released earlier today will likely also attract interest in this currency pair, which could be another reason to trade it today.
AUD/USD Technical Analysis
Looking at the price chart below, we can see evidence that bears have good technical reasons to feel like they have an edge, and to be looking for lower prices.
We see a medium-term bearish trend which is orderly and symmetrical, meaning it is more likely to hold. The quality of the channel is proven by the linear regression analysis study I have imposed there.
The US Dollar Index has just made a bullish breakout to a new 13-month high price, while the Australian Dollar’s central bank will be under a bit of dovish pressure as inflation undershot expectations.
These are all bearish factors, but there may be two big reasons for bulls to hope and bears to fear. Firstly, the long-term trend is bullish. Secondly and likely more importantly, the area from about $0.6875 to $0.6835 was a strong bullish inflection when last reached at the end of March. Bulls looking for value and to get in early on a potential trend change will be looking to go long in this area.
My Take on AUD/USD
I am happy to day trade short on bearish price action between $0.6963 until $0.6875 is reached. Between $0.6865 and $0.6835 the best approach would be to look for a long scalp. Below $0.6835, the price will look very bearish and set for a further meaningful drop in price.
Review, Support & Resistance Levels
My previous AUD/USD signal on 14th May was not triggered, which was just as well as I thought the best opportunity would be on the long side.
Risk 0.25%.
Trades must be taken before 5pm London time Friday.
Short Trade Ideas
Short entry following a bearish price action reversal on the H1 time frame immediately upon the next touch of $0.6924, $0.6962, or $0.6982.
Put the stop loss 1 pip above the local swing high.
Move the stop loss to break even once the trade is 20 pips in profit.
Remove 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to ride.
Long Trade Ideas
Long entry following a bullish price action reversal on the 1H1 time frame H1H1H1 time frame immediately upon the next touch of $0.6894, $0.6881, or $0.6834.
Put the stop loss 1 pip below the local swing low.
Move the stop loss to break even once the trade is 20 pips in profit.
Remove 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to ride.
The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.
There is nothing of high importance scheduled today concerning either the Australian Dollar or the US Dollar.
Ready to trade our daily Forex signals? Here is our list of the top Forex brokers worth reviewing.