Update on the potential Aussie trade...

FX:AUDUSD   Australian Dollar / U.S. Dollar
98 0 0
Starting from the top this morning, we can see that the commodity currency remains trading within touching distance of a weekly resistance line drawn from 0.7604. We believe a reaction from this vicinity is likely this week, so do keep a tab on this level. In conjunction with weekly price, the daily candles also show that the next objective to reach is the aforementioned weekly resistance line. Before this is achieved, however, there’s a chance that the Aussie may retest the daily demand base seen at 0.7517-0.7451.

Stepping across to the H4 window, the view from here shows that price topped out around the 0.7567 mark yesterday and eventually slipped below H4 demand at 0.7544-0.7534. As we write this H4 zone is currently being retested as supply, potentially signaling a continuation move down to the 0.75 handle.

Our suggestions: In the event that the above analysis is correct, an aggressive buy trade from 0.75 could be a possibility. Here’s why:

• A successful retest of 0.75 (housed within the above said daily demand area) will form the C-leg to a potential H4 AB=CD approach up to 0.76 (coincides with a deep H4 88.6% Fib level at 0.7608) – essentially the weekly resistance line at 0.7604. Now, given that the path north is clear on the higher timeframes from the 0.75 region, one may look to take an aggressive buy from here, ultimately targeting 0.76. For those interested in taking a long from here, we would strongly advise waiting for the lower timeframes to show some form of buying strength before committing capital: a collection of well-defined buying tails, for example.

And for the more conservative trader (which is what we try to be):

• You may prefer to wait and see if price does indeed rally up to 0.76 to take a short position. Given the confluence seen around the 0.76 handle, our team has left the pending sell order at 0.7599 in place, with a stop above the high 0.7647 at 0.7649. Regarding our first take-profit target, this is a little difficult to judge since the approach has yet to be completed. Usually though we look to aim for the next logical area of demand on the H4 timeframe.
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