AUD/USD Price Analysis: Bears on the move to break key trendline support
|- AUD/USD bears line up for what could be a strong move to the downside.
- The stars are aligning for a bearish setup ahead of key jobs data today.
AUD/USD fell 0.57% in the last hour on the back of comments from the Reserve Bank of Australia governor Philip Lowe who says the budget strategy was right but warned that it is possible to cut rates down to 10 bps.
This has lead to a technical situation worth delving into.
In a top-down analysis, and taking into account the state of play in the US dollar, a trade set up could be in the making for bears seeking a discount.
Starting at the lowest time frame to illustrate where an opportunity could be developing, we see that the price has just broken below a critical support line as follows:
4-hour chart
This is where bears will be drawn to, providing that the longer-term time frames synch with the bearish scenario.
However, bears will be keen to see the price develop sideways above the early October lows and start to provide an opportunity to short at a discount or retest of the counter trendline and resistance.
Top-down analysis
Now, let's see if the longer-term time frames marry with the 4-hour bearish prospects.
Monthly chart
So far, so good.
The monthly chart offers a bearish wick that essentially is just a correction of the broader bearish trend on lower time frames, such as the weekly and daily charts.
In other words, this wick is expected to be filled in on an extension of the downside on lower time frames.
Not only that, the price is expected to give back some ground on the monthly chat and offer at least a 38.2% Fibonacci retracement back to test prior structures.
Weekly chart
The weekly chart illustrates that wave-3 is already on its southerly course and is expected to fill in the monthly wick in an extension of the dominant bearish trend and monthly correction towards a 38.2% Fibonacci retracement.
Daily chart
With the daily trendline support now under pressure, bears will be monitoring the 4-hour time frame on the lookout for a discount and bearish technical conditions for a high probability setup for the downside:
Now, we do have a risk event coming up today, so it would be prudent to wait to see what the outcome is and subsequent price action.
Australian Employment Preview: September job losses to flag RBA rate cut
A sell limit at reduced risk could be placed in case the data fuels the downside and considering the amount of resistance, there is decreased likelihood that a spike will move as much as 100-pips on the knee-jerk to trigger the stop loss immediately.
However, over a 4-hour average period, the price has moved more than 100 pips according to the FXStreet True Range historical data for the event:
DXY bullish Reverse Head & Shoulders
Additionally, it is worth noting the bullish structure forming on the daily chart for the DXY:
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