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