BarroMetrics Views: AUDUSD on the Cusp?
It seems to me the AUDUSD is offering great opportunities if you are trading the weekly or monthly trend.
FIGURE 1 shows the 5-day (weekly) and 18-day (monthly) situation. We see a pause in the 18-day that will retrace to the .9800 to .9875 area if it turns to full development; if the 18-day remains ‘a pause’, we see a completed or about to be completed 5-day development.
Let’s turn to Figure 2 (240-min) for a DNA of the 5-day swing.
Here are the salient points:
- At green 2, we see a Spring Change in Trend Pattern. The minimum target is the Primary Sell Zone .9339 to .9282; with the most likely being the .9318 to .9282. The expected target in upside breakout above .9339, confirmed by a bullish conviction close above .9407 looking for .9800 to .9875.
- At blue 3, we see the minimum target attained but sellers (supply) being strong enough to push prices to the Value Area Low.
- We then have another attempt for an upside breakout that again fails.
- When prices move to .9100, we have what I called a Failed Spring Change in Trend. This is a sign of weakness. For me, it suggests that a downside breakout would be successful and is one of the few situations I would initiate a position on the breakout rather than wait for the retest.
- If, instead of breaking down, the AUDUSD heads North and again challenges the Primary Sell Zone, we have what I call the Rule of 4: on the fourth swing attempt, a market ought to break through. If instead of breaking up, we see a successful rejection, this would suggest a breakout of the opposite boundary of congestion – in this case, a successful test of the Primary Sell Zone would suggest a downside breakout below the Primary Buy Zone and a continuation of the 18-d swing line down.
- I don’t expect the GDP, due out at 8:30 am EST, to have much affect on the AUDUSD – it should come in within the expected 0.2% to 0.4% (old calculation). But, a caveat: I have no idea how the new mode of calculation will affect, if it does at all, the market’s response to the GDP; so, we may see some surprises.
- I do expect the FOMC decision, due out 2:00 PM EST, to be bearish for the USD. If so, then we should see the AUDUSD rally.
In any event, the strategies are clear:
- Sell a downside breakout below .8997 without waiting for the retest.
- Buy an upside breakout above .9407 on a retest;
- Sell, should the AUDUSD attain .9339 to .9282, and then fail. I would treat a 240-minute bearish conviction bar as the sign of failure.
- The target for the breakdown is the .8231 to .8065 zone; the target for the break up is the .9875 to .9800.
- The stop for each strategy cannot be yet determined; the most logical place would be the most recent swing extreme prior to the sell or buy signal.
FIGURE 1 AUDUSD DAILY
FIGURE 2 AUDUSD 240-minute