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AUD/USD Correction Looms Following Bearish Engulfing Pattern

AUD/USD Correction Looms Following Bearish Engulfing Pattern

David de Ferranti, Currency Analyst

Talking Points

  • AUD/USD Technical Strategy: Shorts Preferred
  • Bearish Engulfing pattern on the daily offers warning
  • Key resistance remains at 0.9440, support at 0.9330

A Bearish Engulfing candlestick pattern on the AUD/USD daily chart has superseded a Shooting Star formation and offers a warning signal for declines in the pair. 0.9440 continues to offer notable resistance, while a pullback is likely to be met by buying support at the psychologically-significant 0.9300 handle. At first glance, the setup appears promising for shorts, however traders should be mindful that the uptrend remains intact and a similar signal back in April failed to elicit a bearish reaction.

AUD/USD: Bearish Engulfing Pattern Offers Reversal Signal

AUDUSD-Correction-Looms-Following-Bearish-Engulfing-Pattern_body_Picture_2.png, AUD/USD Correction Looms Following Bearish Engulfing Pattern

Daily Chart - Created Using FXCM Marketscope 2.0

A look at the four hour chart gives us a conflicting signal with a Bullish Engulfing pattern hinting at an intraday bounce. However, the formation has yet to receive confirmation from a successive up-period, and may face a limited response given the context provided by the daily.

AUD/USD: Bullish Engulfing Pattern Suggests Strong Support at 0.9330

AUDUSD-Correction-Looms-Following-Bearish-Engulfing-Pattern_body_Picture_1.png, AUD/USD Correction Looms Following Bearish Engulfing Pattern

4 Hour Chart - Created Using FXCM Marketscope 2.0

By David de Ferranti, Market Analyst, FXCM

Follow David on Twitter: @Davidde

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