ICmarkets
Long

Possible rally today due to high correlation confluence...

FX:AUDUSD   Australian Dollar/U.S. Dollar
188 0 5
Weekly Gain/Loss: - 96 pips
Weekly closing price: 0.7265
Weekly opening price: 0.7245

Weekly view: Since the commodity current peaked at 0.7835, price has fallen sharply for the past three weeks. This, as can be seen from the chart, saw the Aussie take out demand painted at 0.7438-0.7315 which may lead to further selling this week down to demand coming in at 0.7108-0.7186. Nevertheless, before this is seen, traders need to be prepared for the possibility that this market may want to retest the underside of the recently broken demand (now supply) before pushing lower.

Daily view: Thanks to Thursday and Friday’s selling, daily action is now trading from a small demand penciled in at 0.7259-0.7226 that is bolstered by a 61.8% Fibonacci support at 0.7211. At the time of writing, bids are holding this pair nicely, which may attract further bids into this market up to supply seen at 0.7402-0.7335 (encapsulates a resistance drawn from 0.7380 and sits within the above said weekly supply).

H4 view: After Friday’s grind south, the H4 shows that the AUD gapped a further twenty pips lower this morning, consequently tagging in bids around the mid-way support 0.7250 and just missing support at 0.7241. In addition to this support, however, over on the AUD/SGD H4 chart (a pair that has a high correlation with the AUD/USD             ) price is also currently trading from support at 93.265. Furthermore, the US DOW H4 chart, also another market with a relatively high correlation, is trading from a downward channel support line (17789) and support seen at 17482.This correlation confluence, coupled with daily action (see above) puts this market in good stead for a rally north to test daily supply at 0.7402-0.7335. Once/if price reaches this zone, nonetheless, looking for shorts will, due to this daily zone housed within weekly supply (explained above), be the more favored approach.

On account of the above information, our current plan of attack will be to watch for a possible long entry from around the present H4 support. Should we manage to pin down a setup, the 0.73 handle will be our first port of call for profit taking, followed by the resistance line at 0.7337/mid-way resistance 0.7350 (essentially marks the underside of the current daily supply – a sell zone).

Levels to watch/live orders:

• Buys: 0.7250 region Tentative – confirmation required (Stop loss: dependent on where one confirms this area).
• Sells: 0.7350/0.7337 is an area we’ll be watching closely for shorting opportunities (lower timeframe confirmation required).

For confirmation techniques please see the top of this report:

http://blog.icmarkets.com/friday-13th-may-heavy-action-expected-on-the-u-s-dollar-around-midday-today/
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