AUD/USD Resistance: If Someone Tries to Tell you That News Spikes are Irrational, Tell Them They’re Wrong

A bit slow with the post today, but this AUD/USD level caught my eye caught my eye when trading and I feel compelled to write about it today.

So we’ve been watching this AUD/USD daily resistance zone for over a year now. I say zone rather than level, because of all the price spikes through it. You could have drawn your lines any number of ways, from any number of those spikes and it wouldn’t have mattered.

What’s important is the fact that it’s a higher time frame zone that is obviously acting as resistance:

AUD/USD Daily:
Click on chart to see a larger view.

Daily resistance had already capped price up here and fueled by the RBA rates statement, the move down was obviously accelerated.

But what about the intraday price action around that drop? Where exactly did price drop from? Was it actually just an irrational move fueled by the news of a less positive outlook?

Let’s take a look at the 15 minute chart for some clues on just how irrationally price traded:

AUD/USD 15 Minute:
Click on chart to see a larger view.

Well as you can see, price rallied into the decision throughout the Asian Session before tanking. But the intraday high just happened to be this short term support level turned resistance TO THE PIP. Certainly not an irrational place to drop by any stretch!

If you follow this blog and the types of setups that we like to trade, it’s all about looking for a higher time frame resistance zone holding and then so long as it holds, selling any rallies into short term support turned resistance from there. This gives you confirmation that you’re not fighting momentum and gives you levels with good risk:reward to build a position from.

If someone tries to tell you that news spikes are irrational, tell them they’re wrong.

Best of probabilities to you.

Dane Williams – @VantageFX

Risk Disclosure: In addition to the website disclaimer below, the material on this page prepared by forex broker Vantage FX Pty Ltd does not contain a record of our prices or solicitation to trade. All opinions, news, research, tools, prices or other information is provided as general market commentary and marketing communication – not as investment advice. Consequently, any person acting on it does so entirely at their own risk. The expert writers express their personal opinions and will not assume any responsibility whatsoever for the Forex account of the reader. We always aim for maximum accuracy and timeliness, and Vantage FX shall not be liable for any loss or damage, consequential or otherwise, which may arise from the use or reliance on this service and its content, inaccurate information or typos. No representation is being made that any results discussed within the report will be achieved, and past performance is not indicative of future performance.

Source: Vantage FX Blog