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What we missed with this AUDUSD trade; what levels to watch

Failed trade following high impact news

Ok so we fell out of our chairs going long AUDUSD just before a high impact news but thankfully strict risk management using stop orders (which is the right thing to do) saved our skin.

AUD employment change data

Data missed expectation | Source: Investing.com

Is there any value going through the setup again to see what’s wrong? I think there is.

 

Technical signs that point to a bearish case

Setup on daily chart

AUDUSD daily chart

Daily chart

  1. Until last night’s price action, AUDUSD had already broken decisively below a region (green) that supported price previously at points 1, 2 and 3.
  2. The same support turned into a resistance which price action at point 4 shows.
  3. We know now the whole setup was a retracement and pullback.

 

Setup on 4-hourly chart

AUDUSD 4-hourly chart

4-hourly chart

  1. Points 1, 2, 3 and 4 on the daily chart can be seen here more clearly as is the support turned resistance zone in green.
  2. Boxes show that AUDUSD did a bearish expansion week-week; this is one reason at least that going long may be a bad idea.
  3. We have a 1-2-3-4 setup to go short.
  4. Point 4 (blue square) turns out to be a bull trap or wash n rinse.
  5. The 1-2-3-4 was also a bear flag.

 

Setup on weekly chart

AUDUSD weekly chart

Weekly chart

  1. There are at least 3 more reasons but possibly 4 or 5 that identify a very significant resistance here.
  2. Equidistant channel of course provides a very good visual recognition of down trend.

 

Potential supports, targets for shorts

AUDUSD weekly chart #2

Weekly chart – this one shows support zones

If you have short this pair instead, congratulations. These are levels that you can expect to have some influence on price action as long as the pair continues to fall.

  1. Potential supports in orange.
  2. Personally I think that #1 and #2 are most compelling but for traders, the important thing is always to clear one level at a time.
  3. In addition, levels I did not draw in this chart are 2013- low (which is a psychological level) and of course bottom of equidistant channel which is visible in the weekly chart above.
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Director, TerraSeeds Market Technician Pte Ltd. Trader, investor. @sohtionghum was picked ‘Top 70 Forex Twitter in 2015’. Operates multiple strategies.

“Dear reader, I do not have a financial license to give advice. I do not know you the reader. Your financial objective and risk tolerance may be different from mine. I am not responsible for any consequence of your action.

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