AUDUSD is clearly in the long-term downtrend which started in 2013 and entered the zone below 200 SMA (BLUE LINE) monthly in 2015. This break below the 200 SMA (BLUE LINE) is marking the strong downtrend. Even more what is visible in the chart below, and this is now the strong downside support. So the recent almost two years wedge price action is just the correction higher within the downtrend. This wedge is now near the break lower, and the key level for that is 0.7500 level.
So this was an easy part, we are in the clear downtrend and we will look for the short trade. But now let us look the weekly chart. We can see the bounce from 100 SMA (RED LINE) and also the one of the wedge lines 0.7547 level.We can also see the beginning of the downtrend Pitchfork channel. More about Pitchfork channel read here. Now how to manage that within a context of a strong downside continuation? Is this invalidating the idea of a strong downside continuation?
On a daily chart let’s think like the traders, not just analysts. We can see the triangle on this chart. This triangle means that you can take a trade with some good probability if it fails you will need to adjust to price action, but let us do the high probability trade within the prevailing trend. So the triangle is giving us the stop-loss level for the short trade, and that is above the 0.7640 level. The first target would be the 0.7500 level. If you would be stopped out than you would need to wait for a reaction from 0.7700 level for long/short.
You can acknowledge from this article that there is no simple trading strategy, there are some conflicting signals arising from different time-frames. You need to read them and make a trading decision based on a higher probability of success. If the trade fails, stay out of it until new price action develops and adjust to that price action, but based on a bigger picture.
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