AUDUSD—Weak

On Tuesday, AUDUSD had a lower high and lower low than Monday, reaching a low of 1.0017. The drop has continued this morning to a low of .9972. This is just below the second support level I identified on Monday. It's also near or below the .9976/65 early November lows. Because of the layers of support, I'd expect a period of consolidation here. The place to look for that is on the lower term charts. For example, on the hourly chart, there was positive divergence earlier this morning although RSI has since broken below its downtrend line. There were also two lower highs and lower lows on this chart within the downward sloping rectangle. They had a symmetrical look in time and price that made it possible a harmonic pattern known as a "Three Drive" pattern was forming. This is a series of three, evenly spaced, tops or bottoms. In the case of the Aussie, it would have been bullish because it was forming downwards (see the hourly chart below). One looks for symmetry in this pattern, both in price and time. It looks as though it may be breaking down and the pattern won't be confirmed but these are the things to look for if one is looking to scalp consolidations. A tight stop would be mandatory because there are pressures on this pair—seasonality factors, price versus moving averages, etc.

I'd stay short if I had a short position. I am not and will most likely use rallies to short.

The next support levels are .9897, .9831/12, .9757/37, .9643 and .9544. I believe the last one is achievable unless the pair gets back above 1.0183. If the pair rallies, expect resistance around .9985, 1.0075, 1.0104 and 1.0183.

Here's the one-hour chart:













© Dianne Fecteau, 2010. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.

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