AUDUSD Analysis – May 6, 2020.
This is an analysis of the AUDUSD pair examining a possible trading opportunity. Traders are always advised to exercise restraint and caution while trading as it can be risky. Now that that is out of the way, let’s dive into the AUDUSD analysis.
The AUDUSD pair which was in a downtrend hit support on the 19th of March around the 0.5554 regions. This led to a reversal with the price trending upward.
This rising trend hit resistance at around the 0.6557 regions after moving upward for about a thousand pips. A trend line drawn passing through the lows can be seen to be broken as the candle crosses the line at around 0.6545. This breakage of the trend line support signals the end of the uptrend at least in the short term.
The price drew back and fell to 0.6376 where it formed a double bottom pattern before moving up to 0.6459. At this point, the pair began to experience some selling pressure which caused the pair to cease its ascent.
The pair finally formed a double top pattern which it recently closed below its neckline. This signals a move to the downside in the short term.
It is recommended that traders open sell positions below the neckline. It is the standard practice to measure the distance from the neck to the top as a gauge for profit-taking. In this case, it will be advised that the take profit level should be set before the next support.
Price has not been really decisive for the last few days indicated by the “mixing” of the candles and the moving averages shown below. It can be seen further that price has just very recently pulled away down from the moving averages. At the same time, the RSI is above the oversold (30) level.
Furthermore, AUDUSD is in a 7-year downtrend, as shown below, supporting downward action.
In conclusion, forex trading always carries considerable risk. Therefore, proper risk and account management rules must be followed to prevent account-crippling, heart-breaking losses.
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