AUD/USD Forex Signal: Weakly Bearish Consolidation

The technical picture now shows a tightening consolidation, which at first sight looks more likely to eventually break to the upside, due mostly to the cluster of three close support levels all above the round number at $0.6400. 

My previous signal on 14^th September produced a profitable long trade from the bullish rejection of the support level identified at $0.6429.

Risk 0.75%

Trades must be taken before 5pm Tokyo time Wednesday.

• Go short following a bearish price action reversal on the H1 time frame immediately upon the next touch of $0.6448, $0.6461, or $0.6480.
• Place the stop loss 1 pip above the local swing high.
• Move the stop loss to break even once the trade is 20 pips in profit.
• Remove 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to ride.

• Go long following a bullish price action reversal on the H1 time frame immediately upon the next touch of $0.6422, $0.6415, or $0.6403.
• Place stop loss 1 pip below the local swing low.
• Move the stop loss to break even once the trade is 20 pips in profit.
• Remove 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to ride.

The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.

I wrote in my previous forecast that the AUD/USD currency pair was likely to give its best opportunity over the day as a short trade set up from a rejection of the nearest resistance level at $0.6456, although I also thought longs from support could be good scalps. I was half correct about each.

The technical picture now shows a tightening consolidation, which at first sight looks more likely to eventually break to the upside, due mostly to the cluster of three close support levels all above the round number at $0.6400. However, the price action is starting to indicate a bearish head and shoulders chart pattern, which suggests that the price will go on to make a bearish breakdown below $0.6400.

In the absence of any major data releases today, the price could just chop around within its current area, possibly giving small scalping opportunities off both support or resistance. However, I think the best opportunity which might set up would be a bearish breakdown below $0.6400, as the price might then fall quickly to $0.6350 where the next lower support level is located.

I will enter a new short trade if we get two consecutive lower hourly closes today below $0.6400, provided the reward to risk ratio on such a trade looks good at that point with $0.6350 as a profit target.

There is nothing of high importance scheduled today concerning either the AUD or the USD.

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