AUDUSD pin bar rally signal?

[Mercury]

Will USD rally or drop?  That seems to be the battle ground right now on FX.  The trend is with USD but if the trend is turning then we need to see signals of this across multiple pairs with the USD.  The Chinese devalued the Yuan vs USD recently, allegedly as a trade war ploy but maybe there is a deeper need for the Chinese economy (still chiefly an export of manufactured good led economy despite some commentators trying to tell us it has turned internal consumer led, like Western economies) to keep its currency low vs its main customers.  Could the trade war/negotiations be merely a vehicle for the Chinese to get air cover for their manipulations?   Maybe this action had a knock on effect on USd pairs as USD got a boost but if that is over now then we should be seeing reversal signals.  Perhaps this is the bigger macro event and not relatively tiny issues like Brexit..? 

On AUDUSD I think we may have one of those signals but first let's look at the macro backdrop.  On the weekly chart we can see that this pair broke a long term consolidation channel, possible a Pennant (have to look at the Monthly or Quarterly to see it) and we got a bearish phase since then but of later we may have seen a pin bar reversal on strong PMD with oscillators over sold.  The long term trend is bearish but before things really meltdown we are likely to see a bullish counter trend rally.  That pin bar is clearer on the daily chart and currently we are seeing a small scale reversal that may be a 1-2 retrace down before a larger rally.  If we look at the 1H chart we can see that 1-2 more closely and the whole move looks like a V shaped reversal pattern, which, if we get a rally back and price breakout out of the resistance at the top of the V, we may well see a strong rally away.  Currently price is tracing an A-B-C and has been stopped at the Fib 50%.  Could make it down to the 62% yet but in any case we are looking for a break of the overhead resistance.  Ideally I would like to see other USD pairs moving the same way. 

 

[Mercury]

Another market that put in a very deep 1-2 (brown) retrace to the Fib 88% and then rallied hard, thus creating the V-Bottom I referenced above.  The breakout was a Long opportunity but I feel like this market is due another, smaller, 1-2 retrace, as with other FX pairs, and we may set a retest of the breakout support/resistance zone before the really really takes off.  A breakout of the medium term Triangle line is critical to signal the retrace moved is fully on and then I will be looking for a large scale A-B-C to conclude before the mega USD rally takes place.

[Mercury]

Similar set up on AUDUSD as in play on EURUSD.

[phillo]

similar to the EURUSD channel    - target here is 0.60000

[Mercury]

Looks like the AUDUSD is also turning up.  The potential wave 1 (blue) occurred on strong PMD and at a daily chart supporting trend line (see Sept 14 post above).  The rally and retrace went to the Fib 62% and then bounced away.  There is an unclosed gap near the short term resistance, which I expect to be closed immanently and then we will see if a test of the resistance leads to a breakout.  I am already Long off both recent turns and holding for the breakout.

 

[Mercury]

While the Euro and the GBP are in stasis, the latter unsurprisingly given the strong move yesterday. AUDUSD seems to be staging a breakout with a higher high this morning.  There is still plenty of resistance to get through but the signs are promising for a string rally phase.  I would like to see a break of the 6830 area and then a test on the upper daily channel line.  A break of the latter will surely confirm a bullish phase.

On the Daily chart you can see the channel, forming a Triangle with 3 solid rejections on both the bottom and top lines.  The final wave down was in a 1-5 that culminated with an effective double bottom and PMD.  The turn has been backed up by a 1-2 retrace to the FIb 62%.   On the 4H chart you can see an additional ending channel that was broken and then price put in a failed retest of this channel line before rallying away.  We now have a slightly higher high than the wave 1 (brown),  and strong rally price action, which is suggestive of a wave 3.  Should at least test the upper daily channel line, if not break out.

[Mercury]

Since my last post on the breakout of a small channel formation after a potential wave 1 (blue) turn into a rally this market has been in a nice steady rally phase with what looks like a 1-2 retracement put in to prime a longer rally phase.  This seems to have kicked off in advance of the Fed, almost as if the AUD traders knew something...  Now price is touching on the medium term daily chart resistance trend line.  A breakout here will produce a much stronger and longer rally phase I feel.

[Mercury]

Similarly to EURUSD AUDUSD looks to be in a bearish retrace at present.  Interestingly this one strikes me as a clearer case for a deeper retrace, which if the pairs are aligned suggests scenario 1 for the EURUSD, a retrace to the 11,000 level (see separate thread).

On this pair I have a fairly decent a-5 up to a wave 1 (brown) at the daily resistance trend line and NMD at the turn.  If correct then I would not be surprised to see a retest of the Fib 50% support area, circa 6800, before the rally really gets going and a break of the daily trend line and the associated horizontal resistance zone, circa 6940 is crucial to the bulls. 

[Mercury]

Daily chart resistance trend line remains unbreached with a couple of test failures over the past few days.  Remains to be seen whether price will make the journey all the way down to the lower line or turn at an intermediary support zone in a 1-2 retrace that primes a channel breaking rally.  Fib 50% looks favourite at present.

[Mercury]

In addition to the other USD pairs AUDUSD looks to have put in a retrace turn as well, right on the Fib 62% with PMD.  The rally is very strong and consistent with a wave 3 move.  The next important juncture will be a test of the down sloping channel resistance trend line.

[Mercury]

Aussie has staged a mini breakout (higher high) after a retrace to the Fib50/62%.  Now approaching the long term channel line, a breakout of which could open the floodgates.  As with my alternative GBPUSD analysis this pair could be in for a contrarian medium to long term bull run if the USD breaks down.  Wishy washy Fed could do it.

[Mercury]

Breakout and failed retest on the 1H, looking for a next leg break higher.  Nice to be away from the UK election with this pair...

 

[Mercury]

Watching AUDUSD to see if it fails the daily channel line retest following a prior breakout.  Signs are looking good for a USD bear resumption, which should see this retest fail.  If we see a fail and then a break above 6950 I see a long term bull phase emerging.

[Mercury]

AUD seems to be holding in consolidation around the daily chart trend line retest zone, or a bit under.  Seems to be more buoyant than the other pairs at present, could hold here while others continue to retrace lower to their respective support zones.

[Mercury]

AUDUSD has held at the daily trend line resulting in a failed retest and has rallied away now just completed a short term 1-2 retrace and into new higher high territory.  If this holds today then a test of the previous high ( 6940) is next and a break of that opens the floodgates to a long term rally.

[dmedin]

Heading on up:

[Mercury]

A little short term consol just now, which is always a risk area early doors but if it brakes 6900 then my confident will grow.  A break of the recent highs will set up a rally to test 7700 IMO.  wouldn't be surprise to get a little downside first though.

[Mercury]

1 minute ago, Mercury said:

wouldn't be surprise to get a little downside first though.

Having said that, if I look across the USD pair board, there is a decent change of a strong rally soon...

[dmedin]

2 hours ago, Mercury said:

a decent change of a strong rally soon

🤩

[Mercury]

This is really an interesting pair to track right now.  The long term prognosis contains a decent short for a trend change having occurred that would produce a rally through the long term trend line (black) and on up.  There is a lot of upside potential as the top of the market comes in around $1.50.  The crucial juncture could be around that trend line but we may see a temporary bearish phase at this point before a rally to push through it.  All for the future, for now what seems clear on the daily chart is that the daily channel line (triangle) was broken with very strong positive momentum divergence (PMD) on all relevant time frame charts (inc the monthly) and the market has now staged a failed retest of that upper line and rally beyond the previous breakout high.  If foresee a strong wave 3 rally phase, coincident with other related markets.  I am Long off the bounce.

[Mercury]

Taking stock at the end of the year and thinking about what the new year will bring is traditional in many facets of life.  Although in essence artificial for traders as the markets are a continuum rather than bound by the notion of a year (that is more something that professional money managers have to worry about but we retail traders can ignore it) it is none the less a good point to take stock, especially for those of us who seek to follow market participants psychology as people tend to think in terms of defined time frames.  For 2020 I think we will see a contrarian USD bearish phase, which may be much more in some pairs (see my alternative GBPUSD thread for one example where I see a potential long term GBP bull market).  This GBP bull market would be based in the fundamentals of GBP as a safe haven in a global economic crisis, especially now that the drag of the EU has be definitively remove, as has the threat of a Marxist government disaster.

For the Aussie dollar I am thinking of what might happen if we see a commodities led reflation (or hyper inflation) phase in 2020?  Australia has a huge mining sector as most people know so if we do see commodities like copper rally hard then the AUD should do well from the associated benefits to the Aussie economy.  I do not think this will last very long (i.e. not decades) but maybe a year or so as eventually the piper of central bank accomodative policy will have to be paid and this could manifest as a deflationary recession (see my recent post on my "what is the USD doing?" thread).

So if we do find a fundamentals stimulus for the AUD what do the technicals foreshadow?:

• On a very long term chart (Quarterly/Monthly) it looks to me like the bear market since the 1970s ended in 2000/01 and from then to 2012 this pair has been in an A-B-C form rally to a large scale wave A (purple), which turned at the Fib 62% off the 1970s highs.
• The move back down to current levels has been in a 1-5 form, which turned with massive positive momentum divergence (PMD), but crucially it did not make a lower all time low, which suggest the phase is a wave B (purple) rather than a motive wave.  Overall then this suggest we still have a large wave C (purple) to complete a big picture A-B-C (counter trend) before it all comes crashing down...
• Looking at the Monthly we see PMD and also divergence on RSI and Stochastic, with both coming out of over sold territory.
• The Weekly shows a similar set up but before we can get too locked into the long term rally scenario we need to see price break above resistance at the retest of the prior consolidation triangle breakout (circa 7670) and then a new high vs the top of the consolidation phase and then a test of the long term resistance trend line.  For the 1-2 (red) alternative scenario to hold I would expect to see a clear A-B-C form to the move up.  If the move is a 1-5, even if there is a turn around the 7670 area, then the long term rally scenario is more likely.
• Shorter term I expect to see a small scale retrace bearish move, possible to retest key prior breakout support zones but I am biased to see this as a strong wave C/3 phase so pullbacks could be shallow across the board as a USD bearish phase holds sway.

The alternative USD bull market scenario still exists, although the odds are that we will see a bearish few months before this reemerges.  My current thinking is that the likes of EURUSD, USDJPY and USDCAD will enjoy a bearish USD phase before a long term USD rally kicks in and reverses these market but for AUD and GBP things might look a little different and as such if certain fundamentals emerge as dominant (as detailed above) then we could see a sustained rally in these pairs at odds with the bulk of the USD pairs.

The potential for AUDUSD is a long term target of 13,000 before a reversal.  The alternative scenario has either a 7,670 or circa 8,600 turn target (I favour the latter as this lines up with similar targets on other pairs).  Either way AUDUSD looks set for a period of bullish price action in the early part of 2020.