AUD/USD Consolidation Break




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Introduction: As we saw for the past month AUD/USD has been in a massive consolidation range. This week, the price finally broke out of the upper resistance of the consolidation range and showing sign of an uptrend. We saw the price broke the daily resistance yesterday which has been followed by a heavy pullback today. It is critical to pay attention to how price reactions in this range to see if the market will move AUD/USD back into the zone or reject off and create an HL. Before we talk more about this particular topic let’s see the big picture of AUD/USD on the daily chart.

Focusing on the green zone drawn on the chart we the consolidation was started on March 11th and did have instances of manipulation during the last month with overall low volatility. Yesterday we saw the price break out of the top of the consolidation’s resistance and moving with a very high momentum for the first time since that last month. Now let’s zooming in to the 4h chart to see the resistance test and retest we talked about earlier.

We can see the consolidation range better on the 4h chart as the marked ranges help depict the continuous ranging between major zones.  We did begin to, in April, see the market begin to trade in a downward squeezing range before rejecting major support and breaking the short-term downtrend. When price broke out of the range over the last few days we did see a massive FTR on the 4-h but it is important to note how poor this FTR is as the confirmation candle was too large. We also saw an FTB right on the daily resistance on March 8th which was also not valid but was very close as the confirmation candle was also too large to allow for a good risk to return ratio.

As we saw on the chart, the bullish was stared on March 8 after the short-term downtrend was broken. Price has been making very good higher highs and higher lows since then and has respected market trendlines not shown on the chart. Focusing on when the price broke the daily resistance on March 8th we can see how that daily resistance was retested a few times allowing for the potential to execute positions off of the range. In these graphics, we did not add lower timeframe zones as we wanted to clearly visualize the higher timeframe on the lower ones.

Conclusion: We saw AUD/USD finally broke out of the daily consolidation range and showing sign of an uptrend. We have though, seen today’s market trade very bearish which will be important to dictate how the future of the currency trades. Will we see the market trade in the zone and reject as it creates a higher low or will we see a move back into consolidation is something you should be keeping an eye on over the next few trading days.

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