the AUD and NZD bearishness has offered multiple interesting setups during the first half of this trading week.
This time our focus is on the Australian Dollar due to its strong bearish impulsive price action in Wednesday’s Asian session.
Will price manage to continue lower and for how far? Time for a closer look at the AUD/USD but keep in mind that EUR/AUD and especially the GBP/AUD have similar bullish setups (AUD weakness).
The AUD/USD is in a wave 3 bearish momentum. The breakout below the support trend line (dotted blue) earlier this week generated small continuations but the best breakout occured on Wednesday when price accelared towards the Fibonacci targets of wave 3 (purple).
Strong momentum pushes like this typically see a continuation once/after a corrective pattern has appeared. This pattern could be a contracting triangle or a bear flag chart pattern for instance. Let’s take a look at the 1 hour chart how such a correction could play out.
As mentioned above, the AUD/USD, EUR/AUD, and GBP/AUD all are showing srong AUD weakness but lets continue with the AUD/USD. When we see strong momentum such as the AUD weakness occur within a larger overall downtrend, then the best is to wait for pattern. Let the pattern complete on a 5 or 15 minute chart and then wait for the breakout. Eventually there could even be another chart pattern on the 1 hour chart too.
This is how the impulsive price action will extend itself to lower and lower levels. Of course, eventually price will stop this impulsive push and a larger correction or even reversal could take place, which is why we need to know where the key S&R levels and targets are located. For the AUD/USD I am aiming at 0.76 and 0.75.
The AUD/USD continuation setups could occur anytime today or even tomorrow (Thursday). For ecs.LIVE traders we already mentioned two short setups on the AUD/USD earlier in the week.
One was the breakout below pattern and support trend line.
The second was a bearish daily candle close near the low. I was waiting for the daily candle to closer near the low, as a confirmation of a pending bearish breakout below the support trend line. My trigger and entry was the bearish daily candle and the candle high is used for the low.