|

Chart of The Week: AUD/USD traders enter the barroom brawl

  • AUD/USD on the brink of a breakout out as price tests critical resistance. 
  • There is something for everyone  on these charts, just prick your side and take your pick. 

AUD/USD is one of the most compelling set-ups in the making on the forex board. 

We are seeing that the price is some 28% higher since the COVID-19 recovery got underway. The price is meeting tough resistance and it may only be a matter of time before a tidal wave of supply kicks in. 

However, that is not to say that there will not be any further room to the upside, for is resistance is broken with daily support structure subsequent of the break, then the upside will remain the favoured outlook.

On repeated failures of this resistance and a switch-up in the market's positioning, the path of least resistance will be to the downside.

At this juncture, it is a waiting game for longer-term investors who don't want to be caught up in the barroom brawl.

For shorter-term traders, there are plenty of opportunities on the cards. 

Major resistance structure has taken crucial form

Bull/Bear sandwich, AKA, the barroom brawl

Three further attempts to test resistance so far

Tripple top in the making

Bearish divergence 

This smoothed volume indicator is showing that there is less volume going through the market for the pair, indicating traders are on the sidelines with little interest to be holding longs at such extremes. A flurry of selling activity will likely lead to a surge of price action to the downside without much obstruction from the bulls, clearing out the stale stop losses.  

Last dance from the buyers before major sell-off?

As we can see, from the On Balance Volume (OBV) and the Accumulation and Distribution indicators, as well as reading from COT data of late, we have seen a trimming of shorts in a phase of an accumulation from institutions. 

We will wait to see how things develop, but this makes the perfect storm for a bull trap on the breakout of the ascending triangle and current resistance. 

Paying particular notice to the OBV, which is based on the distinction between institutional investors and retail investors, the theory here is that as institutional investors will begin to buy into what retail investors have been selling. 

The increase in volume should drive the price upward, at which point, larger investors begin to sell, trapping the bulls and making for a major switch in trajectory in the price away from resistance in a fresh phase of distribution. 

Up, UP and away

On the other hand, a break of top side structure will lead to a continuation of the Aussie's remarkable resilience for 2020 so far. 

Author

Ross J Burland

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

More from Ross J Burland
Share:

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

By subscribing you agree to our Terms and conditions.

Editor's Picks

EUR/USD climbs toward 1.1800 on broad USD weakness

EUR/USD gathers bullish momentum and advances toward 1.1800 in the second half of the day on Tuesday. The US Dollar weakens and helps the pair stretch higher after the employment report showed that Nonfarm Payrolls declined by 105,000 in October before rising by 64,000 in November.

GBP/USD climbs to fresh two-month high above 1.3400

GBP/USD gains traction in the American session and trades at its highest level since mid-October above 1.3430. The British Pound benefits from upbeat PMI data, while the US Dollar struggles to find demand following the mixed employment figures and weaker-than-forecast PMI prints, allowing the pair to march north.

Gold extends its consolidative phase around $4,300

Gold trades in positive above $4,300 after spending the first half of the day under bearish pressure. XAU/USD capitalizes on renewed USD weakness after the jobs report showed that the Unemployment Rate climbed to 4.6% in November and the PMI data revealed a loss of growth momentum in the private sector in December. 

XRP dips as bearish pressure persists despite ETF growth

Ripple is finding footing above $1.90 at the time of writing on Tuesday after a bearish wave swept across the broader cryptocurrency market, building on persistent negative sentiment.

Ukraine-Russia in the spotlight once again

Since the start of the week, gold’s price has moved lower, but has yet to erase the gains made last week. In today’s report we intend to focus on the newest round of peace talks between Russia and Ukraine, whilst noting the release of the US Employment data later on day and end our report with an update in regards to the tensions brewing in Venezuela.

BNB Price Forecast: BNB slips below $855 as bearish on-chain signals and momentum indicators turn negative

BNB, formerly known as Binance Coin, continues to trade down around $855 at the time of writing on Tuesday, after a slight decline the previous day. Bearish sentiment further strengthens as BNB’s on-chain and derivatives data show rising retail activity.