While a triangle has formed on the AUD/USD 30-minute charts, on the 5-minute time frame, another triangle has emerged. Given the nature of these triangles, a sharp move lower is expected, at least ahead of the European session open. As noted in the chart above, the pattern we see here is a contracting triangle. The levels are labeled as such due to the fact that the range bound price action has occurred after a move downward.
In a bear market, which the AUD/USD is in, at least in the short-term, price action in a contracting triangle will typically occur with lower highs and higher lows. This is evident on the 5-minute chart of the AUD/USD, with points A, C and E occurring in descending order; similarly, points B and D occur in ascending order. As such, given the trend line support, a break below 0.9740 on the completion of Wave E looks to open the floor below 0.9740.
Entry: Short at 0.9740 [Trend Line Support)
Stop: Stop to 0.9759 [19-pip Risk]
Target 1: (Reward/Risk Ratio): 0.9730 (10/19, 0.53)
Target 2:0.9706 (34/19, 1.79)
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