Transcript of Video
Hello everyone, this is today’s video analysis for February 12, 2019. Today we’re going to take a look at the Australian Dollar versus the US Dollar [AUDUSD] for today’s trade analysis.
Starting here on the daily timeframe first, we can look back in time. I want to go all the way back to where the black and the blue circles are back here on the left-hand side of the chart. Blue zone for several days acting as resistance, especially where the blue circle is. You see seven days holding underneath that blue zone as resistance. Green zone as support during that period. Same thing with the black circle. Few days finding resistance. Green zone as support back here on the left-hand side.
So, very interesting areas, the blue zone and the green zone. Blue zone by the way. 0.7100 up to 0.7120 is the blue-shaded area. The green zone, 0.7065, 0.7050. So, historically and factually, the blue zone has shown to be resistance and support. If you really look to the left of the black circle, you could see support there. So, the blue zone has historically been a trading decision point where buyers and sellers are exchanging hands. Green zone as well.
So, if we’re going to trade the direction of the trend, which currently the momentum, sentiment, the trend has been bearish. Look at the red trend line along the right-hand side of the chart. You could see the momentum has been clearly bearish for the past couple of weeks here for the AUDUSD. So, if we’re going to sell in the direction of the trend, we’re looking for a significant area of trading decision to make our trading decisions.
Where has the market, the Forex, made decisions to buy, sell, enter and exit? In this case, sell in the direction of the trend. Historically and just looking at the two circles, we would expect that if there’s going to be resistance, the blue zone, 0.7100, would be where we’re looking for that resistance, and that becomes our lowest risk, highest reward opportunity to also begin looking for an opportunity to go short here for the AUDUSD.
Let’s go ahead and zoom it in one time. And again, you begin to get a little sense of direction here. We’re clearly underneath the 100-period moving average. The question is will it continue to do that. But at least right now, we’re underneath the 100-period moving average. Trend and momentum is clearly more bearish than bullish. Interesting enough, this week we’ve also seen the Forex Black Book, an indicator of momentum, turn red or bearish as well.
So, if we follow along that, we’re looking for sells on rallies into resistance. I want to point one other thing out here as well. Let’s put them side by side. The USD index on the right. Let me see if I can go here. Yeah, there we go. USD index on the right has been clearly bullish. And so, similar periods, while the AUDUSD has been going down, the USD index has been rising. So, you could see that similar period.
So, if we’re going to look for the AUDUSD to continue down, we want to see the USD continue to go up, and vice versa. If the USD reverses to go down, we would typically look for the AUDUSD to go back up. Well, take a look at the intraday candles for the day today. USD is making a little bit of a pullback, isn’t it? It’s coming back down from resistance, green zone down to the yellow zone, 96.70.
That’s kind of a good thing. Remember if you’re going to buy something, you want to buy it at a lower price. If you’re going to sell something, you want to sell at a higher price. Buy low, sell high. Everybody’s heard that before. So, if you’re going to buy again within this uptrend, wouldn’t you want to buy it at the lowest price? Of course you would’ve loved to have bought it down here at the bottom of the black trend line. But if you can’t do that, buying on a dip to support, in this case, 96.70, becomes your opportunity on the USD.
So, if that’s the case, then we’re looking for a rally into resistance on the AUDUSD to become our opportunity to go short. So, coincidentally, maybe not, we’re seeing the USD fall into support. We’re seeing the AUDUSD rise and rally into resistance. So, this begins to give us a little bit of an interest in taking a short into the blue zone. As long as the USD stays above that yellow-shaded area and the black trend line, we look for a potential short on the AUDUSD and we already know that the blue zone is the place to consider that.
Let’s zoom it back in. Let’s take it down to the four-hour timeframe. Look at what’s been happening over the past couple of days here. It’s this area right here, where we see resistance at the blue zone. Already have seen it. Support at the green zone. So, again, if we’re going to look for a lower risk, that’s what I want. I want low risk, right? I don’t want high risk.
So, if I’m looking for a lower risk opportunity, it’s as close as possible to that blue-shaded area, 0.7100. And my risk is that it breaks above 0.7120 and goes higher. So, my stop loss is logically above the blue zone, because at this point, I don’t want it to get back above there. If it gets above there, all hope is lost. We’ll likely see it go higher. So, at this point, we’re looking for shorts into the blue zone. Targets. Of course green zone becomes a pretty logical first target, 0.7065, 0.7050 on the way down. We already know there’s support there. It’s fact. It’s not anything we have to make up.
And then, if we can get it to continue that momentum through the green zone, our next target would be 0.7025, 0.7005, the pink-shaded area. Of course beyond there, we have other targets. But at least that becomes our first two targets on the way down from the blue zone. Risk is a break above the blue zone for the AUDUSD today.
From Forex Traders Daily, this has been your daily analysis with Ross. If you would like to get Ross’ analysis on all the currency pairs he’s watching and all the trades he takes today, join him in his live Trade Room by clicking on the link below. Please leave any comments you have about today’s video in the comment section below.