ICmarkets
Short

A close beyond 0.76 could portend further downside...

FX:AUDUSD   Australian Dollar/U.S. Dollar
124 0 8
Weekly gain/loss: + 29 pips
Weekly closing price: 0.7613
Weekly opening price: 0.7620

Weekly view: Despite the commodity currency ranging close to 150 pips during the week, the pair ended up closing relatively unchanged. As is evident from the weekly chart, the market is in a somewhat compressed state right now. Capping upside since early May 2015, there’s a trendline resistance seen taken from the high 0.8295. Capping downside since late May 2016, we have an ascending channel support line seen extended from the low 0.6827. A break lower would immediately land price within striking distance of a support area drawn in at 0.7438-0.7315, while a break higher could portend further upside towards resistance coming in at 0.7846.

Daily view: Turning our attention to the daily candles, the currency is, at least from our perspective, currently trading mid-range between a supply seen at 0.7765-0.7714 and a support area at 0.7517-0.7451. Technically speaking, we firmly believe both areas carry equal weight. Both zones boast trendline confluence (0.6827/0.7835) and have proved to be areas that can hold ground over the long term.

H4 view: A brief look at recent dealings on the H4 chart shows that the Aussie surged higher on Friday, consequently taking out the round number 0.76 and connecting with resistance penciled in at 0.7645. In view of the trendline confluence and mid-way resistance 0.7650 seen here, price rebounded from this resistance barrier going into the US session, and, as a result, trimmed gains into the close.

Direction for the week: In light of weekly price trading nearby a trendline resistance (see above), and daily structure providing little direction (mid-range – see above), our team has come to a general consensus that the more likely path is south this week according to the technicals.

Direction for today: In that price is now seen nibbling at bids around the psychological number 0.76, we feel this level may be soft and on the verge of giving way, due to the weekly picture. The combined H4 support and H4 Quasimodo support at 0.7533 would be an ideal target for shorts below 0.76. However, we have to be prepared for the possibility that the unit may stall around the recently broken highs (now support ) at 0.7587.

Our suggestions: Considering the above points, a close below 0.76 today warrants particular attention. Even more so should we see price retest the underside of this number as resistance and print a H4 bearish candle. In the event that this comes to fruition, our team will look to short the pair, targeting 0.7533 as our immediate take-profit zone. As for one’s stop loss, we would advise placing it either above the H4 trigger candle or the 0.76 handle.
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