Point to Establish Short Exposure: At Market
Spot: 0.70205
Target 1:0.6891YTD Low /Weekly S2 Pivot
Target 2:0.6725 Median Line Support on Red Channel
Invalidation Level:Close above 0.72235 (October 13th Corrective High)
Fundamental & Technical Focus:
The US Dollar has found itself atop G10 FX much like earlier in the year when a Federal Reserve rate hike was a near certainty. Currently, the US Dollar sits near 2015 highs, and now, the market is pricing between a 66-72% probability that the Federal Reserve could hike their reference rate for the first time since 2006 after a mesmerizing 271K print on Friday, November 6th. Now, despite the impressive USD performance, AUD has held up rather well due to a recent RBA announcement where Glenn Stevens said that a rate cut was unnecessary.
That sentiment may not hold for long, and if not, AUDUSD could easily drop rather aggressively. Australia is acutely sensitive to China. Recently, the data from China has been disappointing. Most notably, Chinese demand, as demonstrated by inflation came in weaker than expected in October only up +1.3%YoY versus 1.5% expected. As noted on recent analysis on the US Dollar, it's premature to be bearish the US Dollar until further data surfaces.
Chart (click to enlarge):
Technically, a few points stand out to me, least of which is that price is coming off the daily Ichimoku Cloud as resistance. Additionally, and Andrews pitchfork price channel (red) shows upperparallel line resistance that has limited price upside recently. Should the pattern hold, a breakdown toward new yearly lows is likely. The current YTD low is 0.6891, and that is also the current Weekly S2 Pivot.
In addition to Andrew’s Pitchfork & Ichimoku resistance, there is a multitude of Fibonacci confluence points. Fibonacci confluence develops when there are multiple price ranges with overlapping levels as per Fibonacci ratio analysis very close to each other. The mid-October pivot happened at a confluence of the 100% Fibonacci expansion ratio as well as a 50% retracement resistance of the June-September range. The Fibonacci zone was between 0.7320-0.7370, and we’re currently 300 pips lower from there and could, and I anticipate we will soon be moving lower.
You’ll also note a timing window that caught the recent downturn on AUDUSD in mid-October. The 50% Fibonacci Time Cycle extension of the same June-September range that gave us a significant Fibonacci Price resistance level as well. Given the drop in the pair at the Price & Time confluence, the downside remains preferable until resistance levels break. The focal resistance is 0.72235, the October 13th Corrective High and a more conservative and closer form of resistance would be 0.7223, theNovember Opening Range high.
AUDUSD Resistance & Support Levels
2nd resistance: 0.7223November Opening Range high
1st resistance: 0.7125 55-DMA
Spot: 0.7020
1st support: 0.7002 Oct. 2 low
2nd support: 0.6983 Sept. 30 low
Trade Setup:
I am looking to sell AUDUSD on strength or enter at market. The closer to 0.7223, the November Opening Range High, the better as that would put me in close to a recent turn in the market.The target is at .06725, which is the current Median Line Support. This target aligns with a favorable risk: reward ratio that our Traits of Successful Traders report found to be one of the best things a trader can do to ensure long-term sustainability in your trading.
