AUDUSD: Bearish Momentum Takes Price Into Broad Reversal Zone?

AUDUSD update: The Dollar is clearly strong across the board, obviously driven by fundamental forces that are weighing on the dollar pairs where it is the counter currency. When it comes to locating swing trade opportunities, it begins with predetermined levels which is part of the best practices that we follow at S.C. When you have a direction in a market as decisive as this one, it is still important not to react, especially when no setup is present. Situations like this offer the opportunity to plan ahead.

Momentum is bearish so it is tempting to just open a short position and hope for the best, but if you consider where price is at the moment, you may think twice when it comes to putting on a swing trade. .7500 is a previous low and important psychological support. .7315 is the reversal zone boundary that is proportionate to the .7500 low. Even though bearish momentum is dominant. price is in a high probability reversal area.

Knowing this puts you a step ahead of the reactive herd. There is no reversal in place, yet, but if the structure materializes, this is an attractive area for a long swing trade. IF a failed low formation appears, along with a pin bar or some other trigger, a lower risk long opportunity can present itself, even in the face of bearish fundamentals. The first target to consider is the .7579 level (.382 of current bearish swing). Again, this idea is only relevant if a reversal shows up in the current range that is defined by the .7351 boundary.

When there is no setup, there is no trade, no matter how obvious a market looks. Levels and setups are the building blocks of a trading plan and having a method or process to define these structures is key. At S.C. a signal is not issued unless a particular set of criteria is met which means we will let a market go without us if there is no setup. Having a process such as this helps to minimize emotional tendencies and puts you in the position to anticipate rather than react. Follow along at S.C. and see how we apply this simple philosophy across many markets.