Interesting price action is occurring right now as the AUDUSD is breaking a 4 hour resistance trend line. This potential breakout was already mentioned in last week’s Forex recap and Nathan’s article. The same development is taking place on the AUDJPY. Are both trades worth trading or is one of the two better suited? This question and more are reviewed below.
The AUDUSD retraced to and roughly bounced at the 61.8% Fibonacci retracement of the last swing high swing low and is now breaking a resistance trend line on the 4 hour chart. The trend line has multiple (4) hits and a balanced angle (40-45 degrees). This indicates a well respected and seasoned trend line as our trading room members are diligently aware of.
The break of that trend line has occurred: there is a decent sized and clear bullish candle towering above it. The candle’s close is also near the candle’s high which confirms the control of the bulls within those 4 hours. Therefore an entry upon the closure of the candle already suffices in my opinion with a stop loss below the bottom (and in my case below the 78.6% Fibonacci retracement – just in case). Take profit (TP) has been left open and a trail stop loss will be used to exit the trade.
Be aware that there is always a chance of a (small) retracement of the break out candle prior to lift off. Any of the Fibs mentioned on the 1 hour chart (magenta) have a decent probability of acting as support for upside continuation.
From a weekly perspective last week’s bearish candle was a retracement of the bullish candle prior to it. However, the bullish candle’s low (and high too) was not broken, thereby making it an inside candle with plenty of potential space towards the next resistance (Fibs and top).
AUDJPY + USDJPY
The AUDJPY has a similar bullish structure as the AUDUSD, but how could the Yen currency potentially impact the AUDJPY? In these cases, the USDJPY is certainly a currency cross worth examining closer.
Here the pair is showing signs of corrective price action. The downside price action had in fact more momentum than the current slower up move. Also price has respected all of the retracement Fibs such as the 23.6%, 38.2% and the 50% by pausing for substantial period of time at those levels.
When zooming out to one time frame higher, the daily perspective is fully confirming the lack of a current trend. Price is stuck in a wedge and needs to break out of this corrective chart pattern before a sustainable trend could be expected. Despite the lack of trend, the “flow” (momentum) of price seems to be bearish – especially the last fall has its signs of power.
With these levels of insecurity connected to the Yen currency the better choice seems to be the AUDUSD.
Thanks for sharing this article and wish you Many Pips!
Latest posts by Chris Svorcik (see all)
- USD Bull Trend Receives Green Light During FOMC - October 30, 2014
- Predictions on the Major Currency Pairs for November - October 30, 2014
- Why Forex Traders must Embrace the Road Map - October 28, 2014
Winner’s Edge Trading, as seen on: