Potential Bat pattern forming on the Aussie...

2016年5月3日

After price shook hands with the 0.7600 handle late last week a strong wave of bids came into this market yesterday, pushing price to highs of 0.7671 by the day’s end. What this also did was begin to form the D-leg of a potential H4 bearish Bat pattern which completes just below H4 supply (0.7765-0.7751) at around the 0.7740 mark. Technically, this H4 pattern also tops out deep within the confines of a daily supply zone coming in at 0.7765-0.7714, thus adding weight to this area. In view of the weekly chart, nonetheless, support at 0.7604 looks to be holding firm for now, which if this continues, could force this market up to as far as weekly resistance drawn from 0.7846.

So, with the technical picture in mind and an upcoming policy decision from the RBA just around the corner, what’s likely in store for this market today? Quite simply, one could, if patient enough to wait for the lower timeframe confirmation, look to short from the H4 Bat sell zone we discussed above. Irrespective if one waits for confirmation here or not, we would advise placing your stops above the current H4 supply at 0.7770. The reason we require confirmation here, however, should be clear. By selling from this region, one is effectively going against weekly flow (see above). In regards to confirmation, this could be in the form of an engulf of demand and subsequent retest as supply, a break/retest of a trendline or simply a collection of selling wicks around a lower-timeframe resistance.

Levels to watch/live orders:

• Buys: Flat (Stop loss: N/A).
• Sells: 0.7740 region Tentative – confirmation required (Stop loss: dependent on where one confirms this area).