Today’s Trading Edge: AUD/USD – Aussie plunge tentatively finds support

WWM AUDUSD Dec 26 2014

The AUD/USD daily chart displays a potential pause in the strong bearish plunge that has been in place since mid-November.  Since the near 250 pip rally that both ended on November 17th and respected the 50-day Simple Moving Average (SMA) price, has steadily made new multi-year lows.

Major downside moves are nothing new to this pair, but thin market conditions may allow for a prolonged period of range trading that could allow a higher bounce off the .8087 low that was made just before the holiday.  The chart above displays that price may have formed a bullish butterfly pattern.  The pattern does not have optimal Fibonacci confluence with the X to A extension level not lining up with the B to C leg’s 161.8% Fibonacci expansion level.

Currently key upside resistance may come from the .8300 handle followed by stronger resistance from the 50-day SMA at .8524.  Eventually after the New Year, downward momentum may return and target a slide towards .7700.

The trade: Buy AUDUSD at .8100 with a stop loss at .8050 and a take profit at .8250.  The Risk/Reward Ratio is 1:3

Edward J. Moya

Technical Strategist

Edward J. Moya is the Chief Market Strategist for edmoya.com, an educational website for foreign exchange and commodity traders. He has over 15 years of investment industry experience in forex, stocks, options and futures. At edmoya.com, Mr. Moya writes daily currency and commodity analysis and has authored numerous articles on trading using both technical and fundamental analysis for major financial publications. He is a contributor of technical and fundamental analysis in currencies and commodities to SFO, Market News International, and Forex Factory.

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