AUDUSD failed on a break outside of “Red Box” to the downside. Sellers forced to cover.

The AUDUSD broke lower yesterday, and in the process fell below the floor area near the 0.63567 – 0.6364 area. That floor area was the low of what has been a up-and-down consolidation area (see “red box” on the chart below). The upper extreme was up toward the 0.65214 level. The price has been trading within this range for the last 7 trading weeks.

As a result of the break, the price extended outside of the “red box”, which should have led to lower prices. Indeed it did for a little while with the price moving toward 0.6330, but sellers turn to buyers. When the price moved back above the aforementioned low swing area (and back into the red box), sellers were forced to buy on the failed break. The price of the AUDUSD has rotated higher over the last 12 – 16 hours.

What next?

Looking at the 4-hour chart, the price is approaching its 100 bar moving average on the 4-hour chart at 0.64176. The high price just reached 0.64146. Above that is the 200 bar moving average at 0.64285.

I would expect forex traders to lean against the 100 bar moving average on the 1st look with a stop above. However, if the price were to move above both the 100 AND 200 bar moving average (greenline currently at 0.64285), the technical bias would shift back to the upside, with traders perhaps shifting their focus, and looking back toward the upper extremes of the “red box” going forward.

So keep test on the rebound, but sellers so far are leaning against the 100 bar moving average.

This article was written by Greg Michalowski at Source