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:
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:
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
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Source: Vantage FX Blog