AUD/USD Setting up a Consolidation Breakout Trade

by Admin

Awards 2013

AUD/USD 4H chart 2/26/2013 7:50AM EST


Consolidation: The AUD/USd entered a period of consolidation since the start of February and still remains in that mode. The 4H chart shows a consolidation range roughly between 1.0220 and 1.0375. As we begin the 2/26 US trading session, the pair is inching down toward the consolidation support area.

Bearish stance: The 4H chart shows a bearish stance. 1) The RSI has remained below 60, and even kissed 30 during the consolidation period, showing maintenance of the bearish momentum. The moving averages are converging and whipping, but all area down sloping, and almost in bearish alignment again. Of course, this is all because the prevailing trend was bearish since Jan. 10, when AUD/USD retreated from the 1.06 area. If the Aussie pushes lower and breaks below 1.0220, there is key support in the 1.0150-1.0175 area – support for a range that started in July 2012.

Upside break: Climbing back above 1.03 keeps the short-term neutral stance, but only a break above 1.0375 should take away the prevailing bearish tilt, and open up short-term targets in the 1.0455-1.0475, resistance area of some late January action.

False break: Upon breakout to either side, if there is pullback across 1.03, then the breakout is likely a false one.