Price has been consolidating into what looks like a flag pattern just below the .7700 major psychological level, a price area of very, very significant market interest, even (and especially) on the higher time frames. I see two main scenarios here: (1) forex traders who are bullish on the pair see the bullish flag and begin loading up for a breakout, or (2) forex traders who are bearish on the pair begin selling.
Well, whichever scenario plays out, make sure to practice proper risk management should you find a trade based on this chart setup.
My textbook Fibonacci setup from earlier was blown away since price managed to close above the 0.9600 major psychological level. It’s no surprise that we’re now seeing the market now consolidate into a flag since it is an area of previous interest between .9600 – .9650.
So where will price go? Well, if AUD/CAD sees enough buyers, then the flag will be validated and price will break through the .9650 level with sufficient and convincing momentum. If not, then price may go back down since the moving averages are still in downtrend mode. That or price will continue to consolidate.
Remember last week’s consolidation area that we identified on the 1-hour chart for AUD/JPY? Do you guys also remember me saying that “price is consolidating [maybe] because buyers are preparing to have another go at the 94.70 handle?” Well, forex traders who were bullish on the pair not only had a go at the 94.70 handle, they even managed to close above the 94.70 handle. It also seems like price is consolidating into a rather rough looking flag (yup, it’s now officially a flag-themed chart art entry).
Of course, it could also be that the bears are preparing to push price back below the 95.70 handle since stochastic indicates that buyers may potentially be exhausted.
Forex Chart Settings:
To get the complete picture and avoid getting blindsided by economic data, you also have to do your fundamental analysis.
Lucky for us, Pip Diddy fills us in on what we need to know about fundamentals with his Daily Forex Fundamentals.