AUD/USD price analysis: building the bearish Gartley
AUD/USD price analysis: with the possible completion of a medium-term formation, we look for rallies to be limited. Resistance seen at 0.7240
Market highlights from the last week
Monday 17 August: risk appetite was steady, although the yen and Swiss franc made gains as fundamental demand for hard assets continued
Tuesday 18 August: commodity currencies made net gains as US weakness dominated with AUD/USD posting 18-month highs
Wednesday 19 August: The Fed minutes were less dovish than expected with little enthusiasm for yield curve control while there were fresh concerns over the economic outlook
Thursday 20 August: precious metals recovered from lows amid firm underlying demand and a fresh dollar setback
AUD/USD price analysis
Let us have a look at the technical viewpoint:
Monthly: traded to a multi-year low of 0.5506 in March. The trend of lower lows at 0.6845 has been broken. What was resistance is now support
Weekly: mixed trading for the last three weeks. We have a 261.8% extension level at 0.7359 (from 0.5506-0.6214). Are we seeing the completion of a short fifth wave (Elliott wave)?
Daily: bearish divergence can be seen on the daily chart (the chart makes a higher high while the oscillator makes a lower high). This often indicates the end of a trend or at least a correction to the downside. Holding within an ending wedge pattern. Trend line resistance is seen at 0.7298. Trend line support held on Friday.
Intraday four-hour: expect trading to remain mixed and volatile. A move to 0.7240 will form an intraday bearish Gartley formation that offers a downward bias
What is your sentiment on AUD/USD?
Outlook: with the possible completion of a medium-term formation, we look for rallies to be limited. Resistance seen at 0.7240
Possible trade setup:
Action: Selling at 0.7240 (resistance)
Stop: 0.7270
Target: 0.7110 (swing low)
Potential return on risk to first target: R4.3 (reward 130 / risk 30)
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