- AUD/USD nearing critical resistance zone
- Just a routine consolidation or is a reversal taking shape?
Unfamiliar with Gann Square Root Relationships? Learn more about them HERE.
The near term technical picture in AUD/USD turned a little less negative last week after thepair failed to record a new low under .7625. The subsequent ‘higher low’ on the daily chart is a warning sign that the downtrend is starting to fatigue, but strength has so far been pretty mild and for the most part unimpressive. The key price zone for us looks to be the .7870/85 as this area marks a nice convergence of several important levels of resistance including the month-to-date high, 38% retracement of the year’s range and the 3rd square root relationship of the year’s low. This area could also be interpreted as the trigger for a potential ‘double bottom’ pattern. Trading is a lot about observation and how the exchange rate reacts around this key zone should shed a lot of light on what is really going on. While below .7870 we have to give the benefit of the doubt to the broader trend. Traction above .7885, however, would warn that a more meaningful correction higher is beginning to take hold.
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AUD/USD Daily Chart: February 6, 2015
Charts Created using Marketscope – Prepared by Kristian Kerr
Key Event Risk in the Week Ahead:
LEVELS TO WATCH
Resistance: .7875 (MTD high), .7885 (Gann)
Support: .7740 (WTD low), .7715 (YTD closing low)
Strategy: Buy AUD/USD
Entry: Buy AUD/USD if it closes above .7885 within the next couple of trading days
Stop: Daily close .7845
— Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
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