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AUD/USD Prepares for Breakout

AUD/USD Prepares for Breakout

Walker England, Forex Trading Instructor

Market Condition: AUD/USD Daily Breakout

Target 1: 2x ATR

Target 2: 4x ATR

Invalidation: A false breakout

AUD/USD Daily Chart

(Created using Marketscope 2.0 Charts)

The AUD/USD has been consolidating for the last 5 trading sessions, forming a symmetrical triangle. Also, if price action fails to break a new daily low or high, today’s candle will close the week with an inside bar. With the market consolidating, this means that traders may begin looking for a breakout during next weeks trading. Currently yesterdays high and low are acting as support (.7160) and resistance (.7246). Traders may look to trade a breakout at these values in the markets chosen direction.

Daily ATR for the AUD/USD sits at 68.5 pips. This means that a 2X ATR target for bullish breakouts may be found near .7383. Alternatively, bearish breakouts may initially find targets near .7023. ATR may also be used to manage risk. A 1X ATR stop may be placed in either scenerio to create an initial 1:2 risk reward ratio.

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.