AUDUSD: a Bullish Gartley in a Bullish Channel
This pair fell 75 pips on Friday after a stellar NFP strengthened the USD. A strong decline of gold also helped to create selling pressure for the Aussie Dollar. The markets expectation of a FED rate hike this summer has certainly increased, so I am fundamentally bearish on this pair. That being the case, I have to take into account what I actually see in the chart.
On the technical side, it has been trading in a bullish parallel channel on the 4H timeframe for the last 38 days, testing both the upper and lower trend lines twice. The price is currently on its way to the lower trend line again, where it might provide an opportunity to buy a low (provided the channel would hold). We also have a bullish Gartley pattern edging toward completion. Price has already passed the B point and progressed 95% from C to the potential reversal zone (PRZ) and the RSI is approaching an oversold value.
When defining the PRZ for a Gartley pattern, we look at the projection of three harmonic levels. I: the 786 retracement of XA, II: an AB = CD pattern and III: a BC expansion converging in the same area (in this case 1618 BC). This defines a tight zone, 25 pips wide, represented by the orange lines in the chart. This zone converges nicely with a daily structure level from 2009. We also have the lower channel trendline going straight through this zone, increasing the odds on a reversal. Should price action test the PRZ and reverse convincingly, I would enter long. SL goes 10 pips behind X. TP1 = 382 retracement of AD and TP2 = 618 retracement of AD.
There are 132 pips to be made (if this pair follows the script) and the trade has a reward – risk ratio of 2.0!
On the technical side, it has been trading in a bullish parallel channel on the 4H timeframe for the last 38 days, testing both the upper and lower trend lines twice. The price is currently on its way to the lower trend line again, where it might provide an opportunity to buy a low (provided the channel would hold). We also have a bullish Gartley pattern edging toward completion. Price has already passed the B point and progressed 95% from C to the potential reversal zone (PRZ) and the RSI is approaching an oversold value.
When defining the PRZ for a Gartley pattern, we look at the projection of three harmonic levels. I: the 786 retracement of XA, II: an AB = CD pattern and III: a BC expansion converging in the same area (in this case 1618 BC). This defines a tight zone, 25 pips wide, represented by the orange lines in the chart. This zone converges nicely with a daily structure level from 2009. We also have the lower channel trendline going straight through this zone, increasing the odds on a reversal. Should price action test the PRZ and reverse convincingly, I would enter long. SL goes 10 pips behind X. TP1 = 382 retracement of AD and TP2 = 618 retracement of AD.
There are 132 pips to be made (if this pair follows the script) and the trade has a reward – risk ratio of 2.0!
You don´t need to be a weatherman to know which way the wind blows - B. Dylan