Looking for a H4 buying tail to probe the 0.78 handle for a buy

1 ต.ค. 2017

Weekly gain/loss: - 127 pips
Weekly closing price: 0.7828

The Australian dollar, as you can see, continued to spiral south last week, resulting in weekly price aggressively piling into a support area penciled in at 0.7849-0.7752. This zone has a strong history and held well as support during the month of August, thus there’s a good chance that we may see history repeat itself here.

In support of the current weekly zone, a strong daily demand base logged at 0.7786-0.7838 is seen planted within its boundaries. While as of current price the market is bid from this daily barrier, traders might want to note that should this area give way, the next port of call will likely be a nearby broken daily Quasimodo line seen at 0.7740.

A brief look at recent dealings on the H4 timeframe shows the unit defended the mid-level resistance at 0.7850 on Friday, and concluded trade forming a near-full-bodied bearish candle. Given the two H4 buying tails printed before the closing candle (0.7821/0.7816), which appear to have consumed any demand residing around the 0.7827 mark, downside looks relatively free to the 0.78 handle.

Suggestions: In spite of the fact that both weekly and daily structures show potential buying may be on the cards, H4 action looks poised to retest 0.78. While H4 price may indeed drive lower in opening trade, there’s little evidence to suggest that price will exceed 0.78.

As stop-loss orders are still likely active beneath 0.78, a whipsaw through this number in the shape of a H4 buying tail (pin bar) would be attractive. Once/if this is seen, our team would look to become buyers on the candle close, targeting 0.7850 and 0.79, followed closely by the H4 broken Quasimodo line at 0.7917.

Data points to consider: US ISM Manufacturing PMI at 2.45pm, followed by FOMC member Kaplan speaking at 7pm GMT+1.

Levels to watch/live orders:

• Buys: 0.78 region (watch for a H4 pin-bar candle to whipsaw through this number before pulling the trigger, stop loss: ideally beyond the pin bar’s tail).
• Sells: Flat (stop loss: N/A).