AUDUSD opportunity?

[Lifesong]

Hey Neal

I know you trade whatever the market does, but looking at the weekly AUDUSD chart we could potentially be approaching a golden opportunity. Perhaps it is wortwhile putting the longterm chart of this pair on the radar of your dailyupdates eventhough the current trend is still down!!

My analysis on a weekly chart highlights the previous swinglow at 0.8511 (Jan 20, 2008) is confirmed by two Fib supports. The first Fib support is the 38.2% drawn by connecting the swinghigh of July 13, 2008 @ 0.9847 and swinglow March 31, 2003 @ 0.6339 and the other is the 61.8% from the same swinghigh to swinglow of Aug 12, 2007 @ 0.7673.

The obvious approach is to wait for confirmation (on daily chart) that price action will respect the 0.8500 level and then enter after confirmation or risk a smaller lot earlier with thighter stop. I believe this is a great opportunity with very favourable risk/reward ratio for the longterm trader being willing to stick to the trade for the next few weeks!! Any suggestions or views you'd like to share?

[FibMaster]

Yes I agree about the 85 level. There will be support. What is unknown is whether the support will be weak, mild, or strong.

Usually, after a strong down-move, I consider the rally to be a short setup, more than a long setup. When a market endures a significant move, there is often an attempt in the opposite direction, the but mentality of the market is still biased in the same direction as the significant move. It takes time for that move to be absorbed and for the market to accept that the move is complete.

After this hard down-move, there will be a rally. The rally can have opportunities for upside profits (particularly in lower time-frames), but we have to be careful of the resistance that may stall it (and set up a great short).

Based on the current swing low of .8495 today (it may change), there are key resistance levels (SK) at 8680, 8770, 8880, 8930 and 9020. (those are taken from the 4 hour chart). So bulls will have to be careful until those are overcome. Those would be good profit exits for bulls, unless the market can blast through them.

If AUD/USD can push through the last three 8880-8930-9020, that will be a heck of a rally! At that time, I will be more interested in long trades than short trades for sure. Until then, shorts are favored at resistance (shorting down to 85-ish), but longs (scalps) are OK (in lower time-frames because of the overhead resistance).

I'm not saying your idea is wrong, just that it could take a strong commitment to ride against all those bears at those resistance levels. Those levels could make the trade very uncomfortable, until the chart can clear through 9020.