AUD/USD

Where to from here?

We suggested a bearish scenario for AUDUSD following an apparent break of a bullish trend line that supported price action since 8/17/07. We looked for a bounce higher to retest trend line support-turned-resistance offering entry for a short trade. Recent weeks have seen the pair retrace higher as expected. That said, expectations of renewed downside momentum look to have missed the mark: AUDUSD has continued higher to set new highs.

This time around, we approach the pair with a clean slate. We notice that price action appears to be showing a Wedge formation establishing since late February. While the upward slope would normally favor the likelihood of a bearish breakout, it seems last week saw AUDUSD break out to the topside and retrace to resistance-turned-support. Should the current candle close as-is, we would be looking at a Bullish Engulfing. We will wait for the close of the current candle and go long should this pattern be confirmed.

AUD/USD Strategy