Aussie (AUDUSD) 250816

How to trade this plan
1. Support and resistance zones shown in green and pink with arrows indicating direction. Bulls buy at support and bears sell at resistance.
2. Keep in mind that when price breaks through support the level will be tested in future as resistance – this is called role reversal.
3. Market direction indicated by 21 and 55. Take note of where the 21 is in relation to the 55 and where price is in relation to the 21. Also take note of the width between the two moving averages. If price is below the 21 you may consider looking for selling opportunities. If the 21 is dynamic resistance then if price falls from the 21 it predicts a lower low – the opposite applies when the 21 is dynamic support. If the 55 is dynamic resistance then if price falls from the 55 it predicts a double bottom – the opposite applies when the 55 is dynamic support.
4. Direction of price is indicated by 5 and 8 MA’s and stochastic cycles. Remember that when you line up higher and lower time frames, price is going in the same direction. The goal is to line up market and price while using support and resistance as your leading indicator.
5. Pay attention to reversal patterns on higher time frames when in a trending market – a reversal pattern could mean the end of a trend. Keep in mind that a reversal pattern that is not at support or resistance is meaningless.
6. Pay attention to reversal patterns on lower time frames when confirming your entry and if you want additional confirmation wait for a 5 8 cross on M5 or M1 before entering your trade. Remember – we enter on the second chance on the 5 minute chart.
7. I have added a summary under the H1 chart indicating observations and trade plan.

Note:
a. Please read Kate’s post on Forex Major Currencies Outlook everyday so you are up to date with the latest news. Here is today’s post: Forex Major Currencies Outlook (Aug 25, 2016)
b. Please be aware of risk events for the day by using the Forex.Today calendar
c. Watch Wayne’s webinar daily at 13:30 SAST or catch the recording on the Forex.Today Youtube Channel

Price has been hanging around at MM3 all week, failing to fall and make a lower low though failing to break through resistance. Last week we failed to break above MR1. Price is sitting at the 21 on H4 and forming a triangle on H1. Could this a setup for Yellen's statement tomorrow? Indication of a rate hike in September or December will see this pair fall. An indication that no rate hike is on the cards this year will see USD weakness and a rise in AUDUSD. I sold on Tuesday off WPP with a weekly target of WS2 - being aware of the potential bullish move indicated by the ascending triangle I have moved my stop loss to break even. Price is currently at 61.8 on H1 so if there are bears trading this is where price should fall. If I see a lower low then I will enter off the lower high off role reversal resistance. Take a look at the other commodity currencies and see if you observe similar price action.

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