The AUDUSD pair started its bearish rally after hitting the major resistance level at 0.81242. The aggressive traders made a decent profit by shorting the pair right at that resistance level based on bearish engulfing pattern (formed in the daily chart). The extended bearish rally comes to halt after the pair hit the major support level at 0.70159. Though the level provided a significant amount of buying momentum, the price spike below to form a nice bullish pin bar in the weekly chart.
AUDUSD weekly chart analysis
Figure: Potential bullish reversal in AUDUSD pair
From the above figure, you can clearly see the bulls are slowly trying to regain control of the market. Though the bullish weekly pin strong suggest a bullish correction the pair lost most of its bullish momentum after hitting the 38.2% bearish retracement level (drawn from the high of 21st January 2018 to the low of 30th December 2018). As long as the critical support level at 0.68226 holds, there is a strong chance of making a profit by executing long orders in this pair. Though the trade setup is fairly simple, the conservative traders in the Forex industry are cautiously waiting for a minor pullback of the price towards the nearest support level at 0.70159.
If the bulls manage to take control of this market from this level, the next potential stop for this pair lies at 38.2% Fibonacci retracement level. A daily closing of the price above that level will eventually lead this pair towards the 50% bearish retracement level. According to the professional analyst of the reputed Forex broker, if the bears fail to limit the bullish movement at that level, chances are very high we will a see a retest of the major resistance level at 0.75929 (61.8% bearish retracement level). This level is going to play a crucial role and any bearish price action confirmation signal will be an excellent opportunity to execute fresh sell orders. On the contrary, a daily closing of the price above the major resistance level at 0.75929 will confirm the temporary bottom formation for this pair at 0.67200.
Though the recent performance of the Aussie economy is not up to the market, the optimistic AUDUSD buyers are taking advantage of the weak U.S dollar. If the FED officials fail to come up with a hawkish statement in their next FOMC meeting minutes, chances are very high we will see a strong surge in the AUDUSD pair. On the contrary, a hawkish statement followed by an imminent rate hike decision will wipe out the AUDUSD bulls in the global market.
Summary: Considering the technical and fundamental parameters, the bulls are most likely to be favored by the big players in the market. As long as the critical support level at 0.67200 holds, buying the pair with stop loss below the massive weekly pin bar. But if the price breaks below this level, the market will again start exhibiting extended bearish rally.
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