I'll Long AUDUSD If This Happens
I've been following AUDUSD closely, and since February 2021, we've been in an extended downtrend on the monthly timeframe. However, for the first time, we saw a break of structure (BoS), as the September monthly candle managed to break and close above the previous monthly LH. This break of structure is notable, as it could indicate a potential shift in the long-term trend.
Though the impulsive move that resulted in September's break of structure wasn’t the strongest, likely due to price respecting the month-long trendline, it'll be interesting to see if buyers can defend price so that the current monthly HL isn’t taken out by sellers.
While we’re seeing a large sell candle in October, buyers can still be considered in control as long as the monthly HL remains unbroken. Let’s move to the weekly timeframe to see if any interesting price data emerges there.
On the weekly timeframe, as seen in the chart above, the previous weekly HL has been broken meaning sellers are gaining control over the buyers as they were able to break and close below the previous low. Not a single rejection.
But does this mean we should all scream sell and short the life out of AUDUSD? Well, our business is not to be on the sell or buy team, our concern should be to make money regardless of the market trend. To do that, we need to look for patterns that suggest the probability of one outcome over another. That’s exactly why we’re doing this top-down analysis. So far, from the monthly timeframe down to the weekly, nothing has clearly indicated where we should buy or sell, even though we’re seeing strong red impulsive candles. Next, let's check the daily.
Now, take a look at that pattern on the daily timeframe. What pattern is that? A bird pattern? Or maybe a plane pattern. (I'm Joe King.) It’s actually a falling wedge, a reversal pattern. But does that mean we should start buying AUDUSD? Not yet. It means we should start watching for a change in structure, perhaps on the 4-hour timeframe. Only then should we look out for our entries.
Still no trading decision, so let’s check the 4-hour next. Please stay with me.
Still no trading decision on the 4-hourly, but there’s a plan. If price can impulsively break the 4-hourly LH at 0.66611 and stays above, then I’ll be looking for a buy on a pullback, probably on the 1-hour timeframe, where I typically look for entries.
But… what happens if price continues to trend down? Since I trade based on structure, I’ll be watching for price to pull back after breaking and trading decisively below the weekly HL at 0.66220.
One key lesson I’ve learned in my trading journey is that it’s not just about price breaking a zone; it’s about how it breaks it. From the weekly, we saw price break the weekly HL at 0.66220. But as we scale down to the daily and 4-hourly, the pattern behind this break hints at a possible reversal.
What are your thoughts on AUDUSD this week? Please share in the comment.
My trading rule is simple, don't take position based on what you anticipate price will do, take position only when price does what you anticipate and presents you a point of entry.
Though the impulsive move that resulted in September's break of structure wasn’t the strongest, likely due to price respecting the month-long trendline, it'll be interesting to see if buyers can defend price so that the current monthly HL isn’t taken out by sellers.
While we’re seeing a large sell candle in October, buyers can still be considered in control as long as the monthly HL remains unbroken. Let’s move to the weekly timeframe to see if any interesting price data emerges there.
On the weekly timeframe, as seen in the chart above, the previous weekly HL has been broken meaning sellers are gaining control over the buyers as they were able to break and close below the previous low. Not a single rejection.
But does this mean we should all scream sell and short the life out of AUDUSD? Well, our business is not to be on the sell or buy team, our concern should be to make money regardless of the market trend. To do that, we need to look for patterns that suggest the probability of one outcome over another. That’s exactly why we’re doing this top-down analysis. So far, from the monthly timeframe down to the weekly, nothing has clearly indicated where we should buy or sell, even though we’re seeing strong red impulsive candles. Next, let's check the daily.
Now, take a look at that pattern on the daily timeframe. What pattern is that? A bird pattern? Or maybe a plane pattern. (I'm Joe King.) It’s actually a falling wedge, a reversal pattern. But does that mean we should start buying AUDUSD? Not yet. It means we should start watching for a change in structure, perhaps on the 4-hour timeframe. Only then should we look out for our entries.
Still no trading decision, so let’s check the 4-hour next. Please stay with me.
Still no trading decision on the 4-hourly, but there’s a plan. If price can impulsively break the 4-hourly LH at 0.66611 and stays above, then I’ll be looking for a buy on a pullback, probably on the 1-hour timeframe, where I typically look for entries.
But… what happens if price continues to trend down? Since I trade based on structure, I’ll be watching for price to pull back after breaking and trading decisively below the weekly HL at 0.66220.
One key lesson I’ve learned in my trading journey is that it’s not just about price breaking a zone; it’s about how it breaks it. From the weekly, we saw price break the weekly HL at 0.66220. But as we scale down to the daily and 4-hourly, the pattern behind this break hints at a possible reversal.
What are your thoughts on AUDUSD this week? Please share in the comment.
My trading rule is simple, don't take position based on what you anticipate price will do, take position only when price does what you anticipate and presents you a point of entry.
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