AUDUSD Near 0.70, Bearish Setup [Fx Newsletter, Jul 28]

This trade idea was first sent to subscribers of the Free Profitable Forex Newsletter on July 28 2022.

AUDUSD continued to correct higher this week and even reached 0.70 yesterday and today, where it was rejected on both occasions. The pair has now fallen closer to 0.6950, perhaps indicating that this could be the top of this retracement leg.

0.70 is an important technical zone in AUDUSD, and with the predominant trend being down, it makes sense to start looking for bearish opportunities around current levels. The bearish trend on AUDUSD is in line with the broad bullish fundamentals of the US dollar, and the longer-term charts confirm the bearish picture, with both the weekly and daily timeframes clearly showing the falling trend.

In the current context, however, the more important resistance is likely around the 0.7050 zone. This is now a Fibonnaci confluence resistance zone, with the 38.% and 61.8 retracements concurring here. If AUDUSD extends the retracement higher and reaches this 0.7050 area, some strong reaction is likely. Such a scenario is likely to be an attractive opportunity to go short.

Watching the 4H chart for clues

Looking at the 4H chart, we can see that the last 8-9 days of the retracement up are well-defined inside of two parallel trendlines. We can use this formation for signals when the retracement has definitely ended and when the bearish trend may resume. Naturally, a bearish break below the support line here would provide stronger conviction that this retracement has indeed. This could be used as a signal to enter a short trade, even if, say, AUDUSD doesn’t first reach the above-mentioned 0.7050 Fibonacci area.

However, in case AUDUSD continues to grind higher and reaches the 0.7050 area, then we can look for bearish setups there. In this scenario, looking to enter short closer to the upper trendline of the 4H chart retracement channel would make sense.

AUDUSD 4h trigger chart