AUDUSD on the Cusp (2)?

BarroMetrics Views: AUDUSD on the Cusp (2)?

In AUDUSD on the Cusp?, I suggested that the AUDUSD would start a strong move down on acceptance below .8994. Based on Market Profile concepts, the target for the move was the Primary Buy Zone, 0.8442 to .8065 (Figure 1). In addition, for various reasons set out in the piece, I felt this was one of the rare occasions I’d be prepared to sell a breakout.

Figure 2 shows why I  covered the breakout shorts early.

In the four days (black rectangle in Fig 2) after the breakdown, the ranges shrank. This is what should NOT occur is my scenario of a strong down move was correct. That being the case, I was wrong about the strong move down. The shrinking ranges suggested a rally and if that occurred, I saw four possible scenarios; in order of my estimate of probability of occurrence:

  1.  An Irregular Correction. The normal pattern would exceed the 67% retracement of the prior sideways pattern but hold below the 78.6% (in Fig 2, the 33% and 21.4%)
  2. The rarer Irregular where we see a penetration of the boundary of congestion but hold below the Max Extension (in Fig 2, .9317 and .9381 respectively).
  3. A retest of the breakdown point (In Fig 2, .8998) to a maximum of the Primary Buy Zone (In Fig 2, .9031).
  4. Acceptance above the Max Extension, .9381, and completing the sequence for a Vbottom.

Figure 3 shows the current picture – the AUDUSD is so far following first scenario.

I’d be looking for a sideways pattern to form, best seen on the 5-period swing on the 240-minute. Once I see a signal that development is complete i.e. the AUDUSD is ready to start a directional move, I’ll look for a signal to go short.

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FIGURE 1 12-Month Swing AUDUSD

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FIGURE 2 05-day and 18-day Swing AUDUSD to Aug 5

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FIGURE 3 05-day and 18-day Swing AUDUSD

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