Time for the Lil Battler to Battle!!!

My observations below should be viewed as general advice and may not be right for you.

I am observing interesting developments here in the Australian Dollar and I thought this would make fora useful post.

The Australian Dollar has now entered a very strong zone of support in the 1.015 to 1.200 area. This zone comprises the following levels:

• Horizontal support line at 1.02. This was a meaningful breakout level in July.
• The 38.2 Fibonacci retracement level off the June low which was the last major swing. These Fibonacci levels are widely watched and traded upon which often provides turning points.
• The head and shoulders projected target zone.

To add to this, I am seeing the following confirming evidence:

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• AUDJPY has now also entered into a confluence of support zones
• Despite weaker than expected employment number and despite the market now pricing in increasing chances of an interest rate cut, AUD has actually rallied today on the back of theses employment numbers. This strength counter to what should be expected is a sign of underlying strength.
• Markets move ahead of the event. The slowdown in China and the continued weakness in the Australian economy have been reflected in the recent falls. Those now calling for big cuts miss the point that markets move in anticipation of this. 
• Bullish divergences forming on the lower timeframes which implies that momentum is waning to the downside.
•  Increasing bearish sentiment. Recently I have now read many reports about the imminent collapse of AUD to parity and below. This after a 450pip sell off from the highs in a few weeks! The same authors were not saying this at 1.06. When the crowd display this kind of sentiment, very often the move has played out.

Those who have been reading my work on the blog and via my morning reports are aware that I showed an interesting topping pattern and reversal area since 1.06. As the trade progressed I showed the breakdown through levels and highlighted the target zone for these patterns. This has now played out. 

In conclusion, there is a strong zone of support coming in here and price is beginning to show signs of strength. This is a potential low risk support  trade setup for traders using their own entry techniques and tight risk under the recent 1.015 lows. Those traders who have been following the trend lower could now tighten up risk on open positions. IF the Australian dollar cannot bounce here, than indeed this does open up the possibility of a breakdown into the second target zone of 1.00. For now the little Battler is trying to bounce. As traders, we have to just trade the levels and follow the price action. 

Please note that I am not trying to call a big picture low here. My point is that there is potential for a bounce out of this support zone with a first target up to 1.03. As traders we position first and then put our ears to the tracks.

Charts:

AUDUSD Daily:

Zone of support coming in here.This is the first RETEST of the previous breakout zone and thus provides a low risk entry into a key support zone. This should be defended at a minimum.

AUDUSD 240mins:

This is the target for the head and shoulders pattern I have been showing

AUDJPY 240mins:

A strong zone of support coming in here

AUDSUD 60mins:

Bullish divergences forming and a possible breakout from an ending diagonal wedge.

AUDUSD 15mins:

These are the short term levels. A breakout above 1.023/1.024 could signal increased momentum to the upside and be a potential trigger for long trades.

 Thanks

Austin