The AUDUSD has corrected from a multi-month high as visible in this H4 chart. This currency pair has formed a falling wedge formation and currently trades around its descending support level of its bullish chart pattern. We believe this pair will move higher and back into its 200 DMA which means it will breakout from it falling wedge formation.
MACD has formed a positive divergence and does not confirm the lower lows set by the AUDUSD. This is another bullish development. RSI has formed a positive divergence as well and also trades in oversold territory. Forex traders should watch out for a breakout from oversold territory as it should accelerate the rally.
We recommend a long position at 1.0250 with a potential second entry level below 1.0150. We also advice traders to place a stop sell order at 1.0180 in order to hedge the open long position and before adding new long positions to this trade.
Traders who wish to exit this trade at a loss are advised to place their stop loss order at 1.0180. We will not use a stop loss order and execute this trade as recommended. Place your take profit level at 1.0400.
Here are the reasons why we call the AUDUSD currency pair higher
- AUDUSD has formed a falling wedge formation, which is a bullish chart formation
- Price action currently trades at descending support levels
- MACD has formed a positive divergence
- RSI has formed a positive divergence as well and trades in oversold territory
- Short covering rally