Chart of the Week May 24th
After forming a triple top over an 8 month period at the .9350-9400 level, the pair has sold off aggressively in the last two weeks shedding 10cents off the highs. Although in the short term it looks a tad oversold and supported on the intraday charts, the pair had a weekly close below the bottom of the Triple Top formation at .8573, the all important .8500 and the major base of support at .8466. All of this suggests the bears will likely retake control of the pair after a brief rally to unwind the oversold status and send the pair further downwards. Where to from here?
The next major levels to come under pressure to the upside will be what was a solid base of support for three weeks at .8466 which should act as resistance. If this level holds and rejects the pair, then we suspect another attack on the 38.2% fib of the entire climb from March 09’ at .6300 – Nov. 09’ at .9400 will be tested which currently sits at .8215. The pair already overshot this once but was likely due to the extreme volatility and heightened emotional / risk aversion trading in the markets. There is a strong base of support between the lows of this week at .8071 and the fib at .8215. Although, should the pair have a daily close below .8000, then the next fib at .7845 likely come under attack.
Beyond this, there is one brief reprieve at .7700 which was a weekly high in May of 09’ and the same monthly low of July 09’. After that, the 61.8% fib at .7482 will likely come under pressure but the failure to overcome the .9400 barrier after 8 months of attempts and the serious selling over the last week suggest the bulk of the longs were liquidated so unless the whispered rumors are true about the RBA intervening to save the currency, this pair is likely headed for some strong downside after a brief rally. Only a weekly close above 8575 forces us to change our view which was the low of the triple bottom.
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