ICmarkets
Short

Possible shorts on the Aussie this week

FX:AUDUSD   Australian Dollar/U.S. Dollar
185 1 15
Weekly gain/loss: + 107 pips
Weekly closing price: 0.7438

Weekly view: After slightly breaching the lower edge of the support area at 0.7438-0.7315, and leaving the 2016 yearly opening level at 0.7282 unchallenged, the Aussie rallied higher last week. Erasing around 50% of the prior week’s losses, the pair looks, at least from the weekly chart, to be on course to connect with a trendline resistance extended from the low 0.6827.

Daily view: From this viewpoint, nonetheless, we can see that price was reinforced by a daily support area coming in at 0.7281-0.7334. Other than Wednesday’s session, the bulls were in fine form throughout the week, closing the week just ahead of a daily trendline resistance taken from the low 0.7407.

H4 view: A quick recap of Friday’s trade on the H4 shows that price extended Thursday’s retest off 0.74 and clocked a high of 0.7467 as we ran into the early hours of the London segment. However, as you can see, price was unable to sustain gains beyond the mid-way resistance point at 0.7450, and spent the London session, as well as a good chunk of the US session, grinding lower.

Direction for the week: Weekly action suggests further buying may be on the cards this week. Though, with the bulls only managing to claw back 50% of the prior week’s losses, and the fact that there’s a nearby daily trendline resistance seen within striking distance, we’re hesitant buying this market at the moment.

Direction for today: We feel the current daily trendline resistance will be a bit of a magnet to price today, potentially dragging the commodity currency above the 0.7450 hurdle into a H4 supply base registered at 0.7500-0.7477, which is likely to hold firm.

Our suggestions: The H4 supply is very interesting. It not only intersects with the aforementioned daily trendline resistance, it also houses a H4 AB=CD bearish completion point at 0.7494 along with the top edge of the supply also representing a round number (0.75).

With the 0.75 handle being a potential target here, traders will need to be prepared for the possibility that a fake through the H4 supply zone may be seen. We believe this is highly possible given that only 18 pips above this level sits September’s opening barrier at 0.7518.

In light of the above points, we have a sell zone chalked in from 0.7518/0.7494 (green rectangle). To avoid an unnecessary loss from a fakeout here, we would not advise setting pending orders. Rather, be patient and wait for a reasonably sized H4 bearish candle to take shape, prior to pulling the trigger.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 0.7518/0.7494 (reasonably sized H4 bearish close required prior to pulling the trigger, stop loss: ideally beyond the trigger candle).
Nice job - I like this level to, time to hunt shorts again....
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