Previous Price Action
The AUD/USD pair has been very interesting to watch in the last few weeks because it is getting closer and closer to a significant breakout all the time.
If you look at the daily chart of the AUD/USD pair below, you can see that it has been stuck in a long-term downward trend for many months now, and recently bounced back downwards after hitting the upper trendline, demonstrating the strength and significance of this trend.
The lower trendline of this trend is not so strong because the first low was caused by a flash crash and quickly recovered, but many long-term traders will still consider this as a low point, and will plot the lower trendline accordingly, as shown above.
Future Breakout
You will notice that these trendlines are converging more and more every day, and because the price is still refusing to break upwards or downwards out of these support and resistance levels, the breakout is likely to be quite a big one when it does finally occur.
Indeed the longer the price stays within the confines of a long-term trend, the stronger the breakout tends to be in general.
Ideally I think many traders would like to see an upward breakout because there is far greater potential for the price to move several hundred pips in this direction.
If it were to break out of the upper trendline and close strongly above this trendline, the price of the AUD/USD pair is likely to move above the highly significant 200-day exponential moving average, which would also encourage traders to open long positions and help to drive the price higher.
If it were to break lower, however, I think the price would struggle to break below the low of the flash crash that occurred at the start of the year.
For that reason, I think a better play would be and wait and see if the lower trendline acts as support if the price continues to fall because if it does and the price appears to be reversing back upwards again, a long position would be a decent high probability trade, and could lead to more profits it is then goes on to break through the upper trendline.
Regardless, it should be interesting to watch the future price movements of the AUD/USD pair in the next few weeks to see where it goes, and to see if there is going to be a significant breakout in either direction.
As always, the content of this article does not represent trading or financial advice. It is just my own personal thoughts and opinions. You should always do your own analysis and make your own decisions before entering any trades.
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