AUDUSD has broken out from the daily uptrend channel with price close to strong support resistance. The price has created strong bullish candles in the past days, but since reaching 0.72818 resistance level the price started to decline.
The decline started and reached an uptrend support line and then continued moving up. The price reached 0.72818 resistance level for a second time and bounced back down. This move has confirmed this resistance as a double top. And a bearish Pin bar added more confirmation to the bearish scenario.
Since then the price is declining and the first stop will be 0.71110 support level. This level showed strength in the past which is visible on the chart. The price found support and returned back up which means we can expect the same scenario again.
The price has broken down from the uptrend channel which means the next stop will be the first support level. From there we can look for bullish opportunities with entry levels visible on the chart.
Currently we have a bullish Pin bar, but the formation of a Pin bar is not in the right place. It is not on the support level with its body, but only a wick is touching the support level. That means the price will have more room to fall down before finding support for a reverse.
Entry level is at 0.71250 which is close to support level and it can expand a little bit more down to lower the risk.
Stop loss is placed below previous lows and below strong support level which gives more confidence the stop loss will be hard to reach.
As an exit point with targets we have the first level at 0.71760 which is high of previous bullish moves. That means the level is highly reachable because the price did not have any problems reaching it when it was in a bullish mode.
Second profit at 0.7228 is below strong resistance level. It is close to an uptrend support level which will now act as a resistance. That means the price will have room to get close to this level, but it will be close to resistance which could put pressure on the price. And the price could need more time to reach the profit level. Locking profits on the first profit target would be a good move to protect the profit earned just in case the price starts to reverse down.
This trading opportunity has a risk to reward ratio of 1:1.8 or more if the entry level is placed closer to support level.
Frano is an engineer, author, forex trader and the owner of a blog where he teaches forex courses for beginners. Frano created a website on how to trade forex to share his knowledge, market analysis which is also published on forexFactory.com, investing.com and many other trading related websites.