Bearish AUD/USD Off of Confluent Resistance Zone
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AUD/USD Rally to Resistance on US Dollar Weakness
The Australian Dollar started to see pressure in late-January after a false-breakout around multi-year highs, and that theme remained for most of the first half of February. This week has produced another lurch-lower in the US Dollar as that bigger theme of weakness continues, but this has helped to perk AUD/USD up to a level of confluent resistance that could be usable for bearish strategies.
The confluent zone is demarcated by two different Fibonacci retracement levels: the 50% Fib of the 2001-2011 major move rests at .7929, and the 61.8% retracement of the 2008-2011 move is at .7946. Collectively, these prices help to produce a zone of resistance that thus far has been able to help elicit sellers after this week’s advance.
This also opens the door to short-side strategies. Stops can be investigated above the psychological level of .8000, so that if bulls are able to continue driving, losses can be mitigated at around 100 pips. Initial profit targets can be set to .7785 for a better than 1-to-1 risk-reward ratio; at which point stops can be adjusted to break-even. Secondary profit targets can be set to .7700, .7600 and then .7525.
AUD/USD Daily Chart: Response Around Confluent Resistance .7929-.7946
Chart prepared by James Stanley
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--- Written by James Stanley, Strategist for DailyFX.com
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