2 confluence zones stand out strongly for the AUDUSD on the 4-hour chart:
From a risk-reward proposition point of view, it might be worthwhile to fade the downward equidistant channel visible in the daily-chart.
AUDUSD in tightening wedge
AUDUSD equidistant channel in daily chart
This is my contribution to Erwin’s discussion on the AUDUSD in his blog.
What is different in my chart is the introduction of another trendline – one that is steeper.
Trendlines have 2 commonly discussed values:
Another important input that a trader can get from trendlines is the momentum of a trend. The steeper a trendline, the stronger the trend, the more momentum price has, the more it takes for a reversal but also the more likely for a violation/retracement.
The blue line is such a steep line (1.). A trader would who has an existing position would be happy with the speed of movement downwards whereas one looking for a low-risk entry would be wary of a short term violation.
Therefore, the gentler yellow line (2.) is a reasonable place to look for a low-risk short. A goodway is to look for a level with as many confluence.
Lastly, a long-side view should only come in if we see a reversal chart pattern and if the gentle trendline is violated decisively as well.
Moment of Aussie is strong but possible short term violation likely
The Aussie has been on a bull rally since late December 2009 till now and coming nearer to 2009 year resistance level at 0. 9404. Recent resistance may be largely due to a reaction at 0.9323 which occurred also in end November and early December.
The current bearish move could be another consolidation for another bull run or a possible follow thru after a Rounding Top formation.
On the other hand, the bulls has never give up on Aussie. In fact, since pre-Christmas, they pushed from a low of 0.8733 to the recent high of 0.9323, amounting to 590pips or 6.8% in less than a month! And the past retracements had formed continuation patterns such as bull flag or pennant to pursue a Higher High.
Who shall overcome and emerge victoriously? We’ll shall see… in the coming days.
The Aussie completed a Head and Shoulder pattern and broke its neckline before Christmas. Now it is making a pullback move to test resistance. If the neckline makes a successful resistance, the H & S pattern will remain intact and its validity as a reversal pattern is confirmed. If the neckline is defied, there is a chance that the initial neckline break may be a bear trap and that Aussie will resume an uptrending move.
Aussie making pullback to test resistance of neckline
Major currencies continue to lose against the dollar. On a week-by-week basis, we saw that the following:
Late week, we see EURUSD, GBPUSD, AUDUSD and the NZDUSD find support on thursday and friday. When trading begins next week, the validity of this support may determine direction for the next few days.
Finding support for NZDUSD. Next? Test of upside.
EURUSD also find support late week
Chart patterns provide a good way to figure out the direction of the market. A good chart pattern offers the following clues to the trader:
All in all, its qualities are predictive, pre-emptive.
Let’s look at Aussie this 2 weeks to see if clues were left for traders.
From left to right:
What to look out for next week?
A horizontal channel reveals levels support at [E] that has broken on the down side. So the opening move of Week 51 could be a test of resistance at [E] and support at [F]. Price takes the path of least resistance so the integrity of both levels may provide clues for the middle of the week to come.
Aussie Dollar chart patterns
US retail sales came in better than expected last night sparking a rally in the dollar. With a week-on-week basis, the dollar is particularly strong against the Euro and Swiss Franc by making new highs.
Some headlines:
The Aussie is caught at a mid-week support-resistance level. It could be an important determinant of this direction next week.
Swiss Franc hourly chart
The dollar is particularly strong against the Euro and the Swiss Franc. On a week-on-week basis, the dollar has made new high versus both currency after a base building.
Direction of the yen is unclear.
The Aussie recovered quickly to its October high after the Dubai World debt panic caused a move in favour of the Dollar. For the moment, December started off strongly by recovering most losses. The action in the past few days built supports at .9100 and subsequently .9230. At the moment, .9230 may be tested again. If a base can be found, then the high at .9300 will be tried once more.
AUDUSD caught in range
H4 shows losses recovered
Recently our students have been doing plenty of trades on the AUDUSD for one reason. Many chart patterns have been spotted and these have given traders a hint at the action to come. Starting on the daily chart, a failed break of the October high with an Evening Doji Star has given bears a hint of a double top. Traditional use of chart patterns require a confirmation only when the horizontal support as been broken. Nevertheless, savvy traders can find many other clues to take action.
Cascading down to the 4-hour chart, we realise that the second top prints a head and shoulder. This is again a typical reversal pattern. Traditional use again calls for action to be confirmed only when the neckline is broken. Now let’s see.
Finally on the 1-hour chart, voila!. The much anticipated right shoulder prints again another reversal head and shoulder. I would say this week there are many happy Tflow® students!
Is it a double top? Failed break creates an Evening Doji Star.
A pattern within a pattern as we can see in the 4-hour
Now let's do this one more time!
This level is the high of the October rally. For now, the hour candles show tentativeness although conclusions can only be drawn when the daily chart give us a significant candle signal.
October high: .9326
Level reached today: .9343
Exceeded by: 0.16%
Traders might be on the lookout for a bull trap as a trigger.
Aussie revisit highTentativeness
Tentativeness
MACD High Probability Trades 
