AUD/USD May Renew Its Depreciation To Test 0.7220

AUD/USD continues consolidating between the resistance in the zone around 0.7440 – 0.7450 and the support in the zone around 0.7320 – 0.7240.

The fact that the pair remains within this relatively wide consolidation for so long without managing to stay above 0.7450 and is practically forming a sideways correction is a signal that AUD/USD is not done depreciating. In case the pair falls below 0.7310 then it will reach the next support at 0.7220 without a doubt. We may even see a deeper depreciation to 0.7150 – 0.7100.

Such a drop would form eleven waves to the downside, after which we may expect a correction north.

As It Was Expected, The Support At 0.7340 – 0.7300 Proved Too Strong For AUD/USD

As I expected, the support in the zone around 0.7340 – 0.7300>>> proved too strong for the pair and it began moving north again.

The pair is attempting to break out above 0.7420 and if it succeeds then the next target should be around 0.7440 – 0.7450, which is a key zone for the last stage of the depreciation that has lasted from the beginning of May until now.

What can we expect after that? In case of a breakout the next support zone is around 0.7170 – 0.7110. I think that support will be the last for the bearish trend from 0.81356 to the expected target to 0.7110. If the pair reaches it, there could be a renewal of the upward trend which could lead the pair back to 0.7600 – 0.7800.

Are We Observing A Test Of The Support Or Is AUD/USD Renewing Its Downward Trend?

After a move north AUD/USD returned to test the support at 0.7340 – 0.7300 (the golden line) which is natural for pairs that are in a strong support or resistance zone.

If we examine the smaller time frame, however, for example the M30 one, we would notice how range-bound the pair is, which is an expression of the struggle between of the bulls and the bears on the market.

In such situations the best thing one can do is wait. If there’s a breakout and the price remains below the local low at 1.72453 that would mean that the pair will head for the next support at 0.7170 – 0.7110 (in blue) without further correction, so that move can be traded.

The alternative scenario is for a deeper correction to 0.7470 – 0.7480.

The Closest Target Of The Depreciation Of AUD/USD Is The Zone 0.7170 – 7110

After the pair tested the support trend line it broke out below (in red) and could not breakout above it, which turned the trend line into a resistance one, the AUD/USD pair started dropping sharply, depreciating with about 340 pips for three weeks.

For the moment the pair looks like it will find support in the zone 0.7340 – 0.7300 (the golden line). It is possible to really begin forming a correction to 0.7450- 0.7480 within that zone, which will give the pair the opportunity to gather liquidity to test the next strong support at 0.7170 – 0.7110 (in blue).

There we can expect a strong and long term correction to the upside, but it is too early to make a prognosis how far it could reach.

AUD/USD Is Resuming Its Downward Trend

AUD/USD tested the trend line of the pennant it broke out below with mathematical precision and resumed its downward trend.

The pair is within a zone of support at 0.7590 and I think it is very possible for it to form some correction to the upside, but in my opinion it will be rather shallow.

The main trend is bearish and the next support is at 0.7400, followed by 0.7200.

Even if we see a rally from those levels that will be corrective and I we may see a larger move north only if the monthly bar for June closes as another pin bar.

The strong support is at 0.7200 – 0.7150. The limit of the figure, however, is much larger and if the pair does reach it I think we can expect a long-term development to 0.6600.

In my opinion, when it comes to this pair it’s a good idea to open short positions at every corrective move north.

The Large AUD/USD Depreciation Is Yet To Begin

AUD/USD tested the breakout of the pennant by rallying to 0.76764 and after that began a depreciation to the zone around 0.7560 – 0.7570.

From that point on there are two scenarios:

There could be a new rally to 0.7750 – 0.7800 which would be a part of the correction to the upside or there could be a renewal of the depreciation toward the next strong support in the zone around 0.7200 – 0.7150.

Those signals are forming on the monthly time frame and their development could take a few weeks to a few months. The current move north is corrective – that much is almost certain. The large depreciation is impending and it should lead the AUD to a new historical low in the zone around 0.6550.

I Expect An AUD/USD Rally

I think we can be quite certain that AUD/USD will form a correction to the upside before it renews the downward trend.

On the picture I have marked where the correction might reach in the light purple resistance zone (0.7700 – 0.7820). The signals are on the monthly and W1 time frames.

We may see a rally for a test of the high at 0.8100 – 0.8130.

The signals for the impending rally are the following:

On the monthly time frame there is a clear pin bar for May called a “boiling point”. That name expresses well the way it forms – a lengthy consolidation on the W1 and D1 time frames.

On the W1 time frame there are five closed bars that are a signal for a move north to the above mentioned levels.

On the D1 time frame the first resistance zone is at 0.7600 – 0.7630. If the pair overcomes that resistance we could expect a rally toward the next resistance zone at 0.7660 – 0.7690. 

The AUD/USD Correction Continues, The Test Of The Trend Line Remains A Valid Target

For the past few days AUD/USD behaved exactly as I expected>>>  – it dropped and tested the support zone at 0.7500 – 0.7520, with the pair depreciating to 0.74759.

Today the rally north was very sharp: for a single day the pair rose from 0.74759 to 0.75750 (at the moment the rally is exactly 100 pips). In my opinion this is not the entirety of the rally – the test of the breakout of the flag on the W1 time frame is still a valid target.

There is a little over a day left until the bar on the monthly time frame closes, but judging by its shape we could make an educated guess how much the pair will rise. In my opinion, the closest target for the moment is 0.7600, followed by 0.7670, but we could witness a rally to 0.7720 – 0.7750.

The AUD/USD Correction May Continue With A Depreciation To 0.7500

There is almost no doubt that before the pair tests the breakout of the trend line it will head for the support at 0.7450.

On the H1 time frame we can notice an almost perfectly formed flag – the pair has reached the support and resistance trend lines twice, has broken out below it and we can hope that the next strong support on the way down would be at 0.7500 – 0.7520.

That could be the entirety of the depreciation and then there could be a test of the breakout  (marked by a thick red line) or the pair could test the local low in the zone around 0.7440 – 0.7420 and then to begin a rally toward 0.7640 – 0.7750.

Today is Friday and the trading week will conclude in mere hours, so it is important to see how the W1 bar will close. It could add more clarity regarding how the pair will develop next week.

AUD/USD Is Developing A Sideways Consolidation

AUD/USD reached without a problem the resistance at 0.7600 and without making any attempts to break out above it and continue rallying it began developing a sideways consolidation which is especially visible on the H4 time frame.

What I can see on that time frame makes me think that before the pair continues moving north to test the trend line breakout, it could test the diagonal support (in red) or even fall lower and test the support at 0.7450.

For the moment the pair is forming a barbed wire pattern on the H4 time frame and the possibility to continue to 0.7500 is increasing.

The alternate scenario is for a test of 0.7600 and a rally to 0.7660 after a possible breakout.

AUD/USD Is Developing A Bearish Correction

The expected bearish correction began, but as most corrections on the W1 and D1 time frames, it is very slow to develop and it will take time to end.

The pair reached the local low at 0.74121 crowned by a pin bar on the D1 and H4 time frames, and began a movement that so far looks like a wide consolidation.

A trend channel is developing on the D1 time frame, and the next resistance level is in the zone around 0.7580 -0.7600, but in my opinion the expectation that the correction will reach 0.7640 – 0.7650 remains valid.

After reaching that resistance level we could expect for the depreciation to continue while the strong support would be around 0.7230 – 0.7220.

AUD/USD May Begin A Corrective Rally Before It Tests The Support At 0.7240

That is the logical conclusion if we examine the D1 time frame.

During its move to the downside the pair has formed a bearish channel and has reached its trend lines (in red) four time times, forming five waves on the way down from 0.81356 to 0.74121.

The last wave of the depreciation is from 0.78125 to 0.74121, which is exactly 400 pips without a correction.

What is more, on the H4 time frame there is a RSI divergence, and if the pair reaches its limit it should reach 0.7650 – 0.7670. That would mean it would test the breakout of the pennant (in blue).
After a correction we can expect a depreciation toward the next strong support at 0.7240.

In my opinion, the rally will be obligatory, but it is still a good idea to wait for a confirmation signal before we open any long positions.

AUD/USD Continues Testing The Support At 0.7460 – 0.7500

AUD/USD formed a correction of about 100 pips north, from 1.74725 to 1.75603, after which it renewed its depreciation toward the support zone around 0.7460 – 0.7500 (in grey).

I think there are two scenarios for further development in this zone:

 In the first scenario the pair will test the support one more time, after which it will begin the true correction to the upside, which should lead it to a test of the support trend line of the pennant it broke out below (in red) – around 0.7650

In this case after the test of that trend line the depreciation should be renewed – the limit of the pennant is 1000 pips in the long term.

The second scenario is for a breakout below the support zone and a continuation of the depreciation.
In both scenarios we should be patient before opening new positions, the intentions of the big players on the market are unclear and we should wait until there is some clarity.

AUD/USD Broke Out Below The Pennant

AUD/USD broke out below the pennant that had been developing for over two years and from now on we can expect a medium or long term depreciation with a first target to the downside at 0.7200.

For the moment, however, the pair has reached a strong support on the W1 time frame at 0.7500 and here there are two possible scenarios:

In case there is a breakout below that support level we could expect a continuation of the downward trend to the first target at 0.7200 without a significant correction.

In case the support at 0.7500 holds and the pair fails to break out below it the first time we could see a correction north to test the trend line it broke out below with target around 0.7650 – 0.7700.

On the M15, however, we can see an expanding triangle which could prove to be a reversal figure and the pair could rally for a correction and a test of the breakout before it continues falling.

Watch Out For The AUD/USD Pennant Breakout

The AUD/USD pennant continues developing and the pair has reached its resistance trend line twice and the support trend line three times. We know that this is a trend continuation figure and after the breakout below the support trend line we can expect at least 1000 pips move south, which is the height of the figure at its base. Possibly there could be an even bigger drop.ь=

The figure is developing in the long term and for the moment the pair has not reached the support trend line on the D1 time frame (100 – 120 pips are left). Once it does reach it we should watch it closely to see whether there will be a breakout or not.

Observing the volumes of every bar will also help, because, as we know, initially after a breakout the volumes drop which confirms the formation of the figure, and after that they should rise.

Either way, the pair is forming a clear pennant figure and finding a suitable entry is an excellent chance to open profitable long term short positions.