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Resistance also offered by the intersection of uptrend and downtrend lines

The Australian Dollar has bounced quite nicely from a low of 0.7420. The bullish wick formed there has taken it to just shy of 0.7560. However, this looks likely it is more of a respite for the Aussie than a strong reversal. AUDUSD is still in a nice downtrend from a yearly high of 0.8135.

If we draw a trendline from 0.8135 to the recent low at 0.7410, you can see that it appears as quite a steep down trend, but when we zoom into the 4-hour chart, the trendline looks to possess a nice angle, thus possibly providing the pair with stiff resistance as and when this level comes to pass.


We also see that the medium-term uptrend, represented by the rising thin line, was broken at around 0.7620, and intersects with the current short-term downtrend, represented by the falling thicker trend line, at around 0.7670, and this area where the trendlines meet will no doubt prove formidable resistance should the price get there within the next few days.


If the pair was to reach the 0.7650-0.7670 within the next few days, it will meet the trendline and also the 50% retracement level of 0.8135 to 0.7410 level.

Trade Opportunity

This provides us with a shorting oportunity with a relatively tight stop loss. The confluence of short-term trendline resistance, the medium-term broken resistance line and fib retracement level of 38.2%, would suggest we could resume the downtrend of these past few months.

Be on the look out for how the pair behaves around 0.7650 -0.7670 if it gets there very soon. A strong reversal signal on the daily or 4-hour chart would indicate a shorting opportunity. Alternatively, you can pre-empt a short there, with the already strong confluence levels.