The Aussie's decline from 1.0857 has so far taken the form of a strong, impulsive move i.e strong downward moves interupted by relatively weak, corrective uptrends
The market has opened this morning with the hourly chart sitting just under the sort of resistance levels that can often be of practical use to traders.
A rejection of this level could set up for an opportunity to enter close to the end of what could be another corrective uptrend. In risk: reward terms this allows a relatively close stop if the set up fails but the possibility of a a significantly larger profit if the impulsive downtrend continues.
If things go the other way and there is a clear break or overlap above this resistance, a more significant rally could be in prospect.
Iv'e outlined the resistance area on the chart above. It consists of:
- Previous horizontal support and resistance (dashed line)
- 200 period moving average (green line)
- A Fibonacci cluster zone. This consists of a 50% retracement from the last major peak at 1.0637 and a projection that the B/C swing will be the same size as the swing up to A (A=C)
One strategic approach to this situation would be to sell on a confirmed rejection of this resistance zone. For example an entry set up could occur on the first close below "A" providing it happens after a trend peak at the resistance zone.
The alternative would be a move up through the moving average. If price was to clear the average by say 25 pips this may imply a significant move higher.