The Aussie Plummets, Tests Key Fibonacci Support Level
Shain Vernier • 1 min read
In a similar vein as the Euro, the Australian dollar is struggling against the Greenback. Rates of the AUD/USD have fallen steadily since last Wednesday?s hawkish FED announcements. The result is a pending challenge of yearly lows and possible extension of the bearish trend for the Aussie.
If you have followed FX Leaders for any period of time then you are familiar with the phrase ?commodity dollar.? Both the Aussie and Loonie are the leading commodity dollars, linked at the hip to gold and oil pricing. Today?s U.S. session action in the AUD/USD mirrors that of gold ? a steep intraday downtrend.
With the AUD/USD closing in on the .7100 handle and September lows, is there anything that can stop the southbound train?
The good news for Aussie backers is that a key Fibonacci support level is just beneath today?s current low (.7140). If it holds, then rotation back toward .7200 will become a distinct possibility.
Here are the levels to watch for the remainder of the trading week:
- Support(1): 78% of September?s Range, .7135
- Support(2): Psyche Level, .7100 (not pictured)
- Support(3): 2018 Low, .7085
Bottom Line: In the event the 78% retracement gives way, a test of the Swing Low (.7135) will become probable. However, the .7100 level is likely to drive participation and provide a bump in pricing before that happens.
For the rest of the week, I will have buy orders queued up from .7106. Using an initial stop at .7072, and a sub-1:1 risk vs reward ratio, this trade is good for 25 pips on a bounce from .7100.
This qualifies as counter-trend trade and with it comes an added degree of risk. Be sure to have your stops down and leverage in check before going live!