AUDUSD: Breakout or Fakeout

The Aussie meanders around the key level of 0.864, leaving traders wondering if it is a breakout or ‘fakeout’. ​

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When the Aussie crashed through 0.864, many (myself included) had expected it to just keep falling like it had when it dropped through 92c level. 0.846 has acted as support throughout September and once broken convincingly signified a break to a new 40year low.

Only 2 sessions below this key level saw the Aussie bounce almost perfectly off of the 50% retracement level between the all-time highs and 2008 lows (purple dashed line) following Friday’s Nonfarm payroll. Then Asia open gapped up to see the Aussie up through this resistance, back within range to suggest a ‘fakeout’.
So is it a breakout or a fakeout?
At time of writing we find ourselves below this key level yet again, after closing the session with a Bearish Hammer. This raises hope for the bears, an opportunity to enter short in line with the bearish trend, and live in hope the plethora of support levels between 0.847-0.85 give way a bit more easy next time.

Of course the risk here is support does its job which makes the reward to risk ratio unfavourable, in which case stepping aside may be prudent (or entering short on lower timeframes with a tighter stop).

We really need to stay below 0.864 to erase the fakeout idea, because back above this level see’s us back within range. That said there are also levels of resistance around 0.872 and 0.875 to consider bearish setups (and increased reward to risk ratio) but the latter level is the midway point of this range so beginning to stretch it.

A break above 0.875 / 61.8% sees us in the top half of the range and most definitely a step-aside market until a convincing trend develops.

Potential Catalysts
AUD: Home loans fell a little flat yesterday and showed investors account for over 50% of mortgages for the first time on record. Up today we have Business confidence, with the rest of the week presenting consumer sentiment, wage price index and MI inflation.

​USD: Core Retail sales, ISM Manufacturing, Trade Balance and Employment figures


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