The Aussie is Coming Down! Weekly Timeframe is Haunting the AUD/USD
Eric Furstenberg • 3 min read
I’ve been eyeing the AUD/USD for a quite a while now. This pair has been trading in a wide range for about a year already, and it doesn’t seem like it’s going to break out of it soon. I’m excited about this pair at the moment because it looks like an immaculate short-selling opportunity is presenting itself on the larger timeframes, which is especially visible on the weekly chart. Let’s take a closer look at the AUD/USD:
AUD/USD – The Bears are Ready!
AUD/USD Weekly Chart
As you can clearly see in this chart, the price has traded into an important resistance zone which is also a range top. The bulls have challenged this level numerous times in the last year, but have been unable to overcome it. In the meanwhile, range traders have been making healthy profits as the price oscillated across this range.
Not only is the price trading close to the range top here, but it is showing signs of exhaustion. This is exactly what we should be looking for in the region of the range top resistance. The last three daily candles all have upward wicks which show us that the sellers are stepping in here while the buyers are becoming exhausted. These rejection candles can be used as a trigger to go short. They also form a pattern which is called a high wave. A high wave is a couple of doji-like candles with wicks pointing either up or down. In this case, the wicks are pointing upwards, which indicates an opportunity to go short. Here is a chart which highlights the high wave formation:
AUD/USD Weekly Chart
One way we can trade this setup is to enter at the current market price, with a stop loss placed a few pips above the high of the candle in the center of this red ellipse. The target should preferably be twice the distance of the stop loss, which looks like a very realistic target distance in this case.
Remember, that we’re looking at a weekly timeframe here and that this type of trading can take a couple of weeks to play out. You might need some patience here. I say “might” because this trade can even take less than a day to play out if the market produces enough volatility.
In a few minutes’ time, we have some really important economic data out of Australia – GDP numbers at 00:30 GMT. 30 minutes after that we have manufacturing numbers out of China. This is important for Australia, and for the Australian Dollar because China imports large quantities of commodities from this country, and it is Australia’s most important trade partner. When manufacturing increases in China, it can be expected that more commodities will be purchased from Australia, which is positive for both the Australian economy and its currency.
EUR/USD – Still Decisively Bearish
EUR/USD Daily Chart
The EUR/USD has also been printing upside wicks in the last three trading days. The technical picture strongly suggests a further decline in this exchange rate. This pair can be traded by either entering at the current market price, trading a breakout of Tuesday’s bearish rejection candle, or waiting for a retracement to occur before entering short. Tuesday’s candle is a strong rejection candle which pierced the 20-EMA. These rejection candles tend to produce good follow through in the days which follow after it. This is going to be interesting…
S&P 500 – Still Flying High
The S&P 500, which is a U.S. stock index, has been remarkably bullish lately. This incredible bull run has slowed down somewhat in the last few days, but this doesn’t mean it’s necessarily going to move lower soon. Of course, the chances of a correction is always there, but let us not fight this powerful trend. Let’s look at a daily chart of this index:
S&P 500 Daily Chart
Here we see a few doji candles which were formed in the last few days. These dojis and the recent sideways movement suggest that we could see a shallow correction soon. Of course, the price could just continue trading higher without forming a notable correction, but a correction would be more desirable in order to get a cleaner opportunity to re-enter this market. Keep an eye on this index. This bull run is not over yet!
Other News Events on Wednesday
The U.S. president Donald Trump will deliver a speech in a few hours at 02:00 GMT.
UK and U.S. manufacturing data are up later in the day at 09:30 and 15:00 GMT respectively.
The BoC (Bank of Canada) interest rate decision is at 15:00 GMT.