*Technical analysis and multiple timeframe trading opportunities on the AUDUSD FX currency pair*
I am going to use this blog post to give you a full technical analysis breakdown of the AUDUSD FX currency pair across multiple timeframes. I am currently holding a short position on this instrument with views to capitalise on daily price movements over the next few days/weeks.
You can track my analysis live via the TradingView platform by clicking on the link below:
This process is called “scaling in” and I have covered this topic in more detail in a previous blog post which can be found via the link below. Scaling in and adding to existing positions is one of the best ways to exponentially increase your trading performance so I highly recommend you read the blog post below.
Let’s start our AUDUSD analysis by looking at the daily timeframe price chart.
Price has produced a significant bearish trend from the beginning of 2019. Multiple lower highs and lower lows and price breaching multiple previous support zones. From July through to the beginning of august we even saw 12 consecutive bearish days taking price from 0.70800 down to lows of 0.66800. This represents a drop of over 5.5%.
Let’s look at the last wave of this higher timeframe bearish trend and I will talk you through the multiple confluences I am seeing that gives me my bearish bias.
As always, I apply the fibonacci retracement tool to the previous swing high and swing low points of the trend to find potential reversal levels. Price has rejected the daily 0.50 fib retracement level with 2 daily wick rejection candles and a bearish engulfing candle. This is a good sign that this level is holding strong as resistance.
There is also a nice previous support now resistance zone residing here where price has previously bounced from on multiple occasions. Support and resistance zones are really good to use when trading trends because they often hold value multiple times from the past and in future.
Another benefit of using the fibonacci retracement tool is to use the extension levels to predict future profit targets. I like to use the -0.27 extension level for an extended profit target when trading with the trend because the probability of a new lower low being made is on my side with a bearish trend.
Let’s look at the 4hr timeframe chart for more confirmations.
A key part of trading is being able to know how markets move and to be able to spot the signs that show a reversal or “next move” is about to happen so you can profit from it. One of these signs that I like to look for when trading reversals is the flattening and squeezing of price.
The 4h timeframe chart shows this flattening of price and slowing of bullish momentum. This indicates the buyers are slowly dying off and traders are taking profit on their long positions at this level.
We also have multiple rejections of the 0.68850 resistance and fib 0.50 retracement level with no 4hr candles closing above it. This further adds to my belief that a reversal will occur at this zone because a lot of sellers are present keeping price down.
To clarify, this AUDUSD short trade that I am holding is a trend continuation on the higher timeframes. I am shorting because the daily chart has made multiple lower highs and lower lows and I am trading with this pattern. However, on the lower timeframes, my short position entry would actually be a reversal entry because I am trading against the near term bullish move that was the pullback for the larger trend.
Top Tip: It always pays to be on side with the higher timeframe. This is why I always show you my multiple timeframe analysis.
I will now show you my initial short position entry on AUDUSD and explain why I entered where I did. I will then go on to show you my price prediction for the next week and where it might be possible to get involved and add to short positions.
I used the lower timeframe 1hr chart to enter with the best possible accuracy in order to increase my potential reward:risk ratio. I entered short on the next lower high and bearish candle closure below my weekly fibonacci and resistance level.
My initial near term price prediction for this FX currency pair was for the bullish trendline to be broken when price next sells off from resistance. It would then create a new lower low on this timeframe before pulling back to retest the broken trendline and 1hr 50ema before making its way down to lower profit targets.
The chart above shows my prediction for how price might move over the next week of trading. Now we have seen the previous bullish trendline broken and the 1hr 50ema broken, I will look to trade the 50ema as a dynamic resistance and add short positions on ay future rejections.
As with most things, price doesn’t move in straight lines and pullbacks will occur as price makes its way downward. The lower highs should provide good discounted entry opportunities to trade with the bearish momentum.
As it stands, now we have all 3 timeframes aligned with the daily trend, 4hr trend and 1hr trend all being bearish with lower highs and lower lows being made. This is the perfect scenario for me.
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DISCLAIMER: None of the information posted on this site is to be considered investment/financial advice. Trading is high risk and you should only trade with money you can afford to lose.