AUD/USD Price Analysis: Trading in a mini range within a range
|- AUD/USD is contracting within a very tight range, itself within a range.
- The pair is likely to break out of both ranges eventually in an explosive move.
- An upside breakout is marginally more likely given the trend prior to the formation of the range was bullish.
AUD/USD is trading in a mini range within a range, visible on the 4-hour price chart. The pair has been going sideways since the middle of May but since June 19 the waves of buying and selling have further narrowed creating a “range-within-a-range”.
AUD/USD 4-hour Chart
A break above the mini-range high at 0.6679 would probably indicate a continuation up to the enveloping-range ceiling at 0.6709. Likewise a break below the mini-range low at 0.6625 would probably lead to a move down to the larger-range floor at 0.6590.
The short-term trend is sideways and as long as price remains within the bounds of the larger range it will likely keep extending within the range, since “the trend is your friend” as the saying goes.
Eventually the pair will break out of its range and the move is likely to be very strong since it is a general rule of markets that periods of low volatility like now are followed by sudden bursts of high volatility.
An upside breakout is marginally more likely to happen because the trend prior to the formation of the range was bullish.
A decisive break above the ceiling of the range would see a follow-through to a conservative target at 0.6770. A decisive break below the range floor would indicate a follow-through to an initial target at 0.6521.
A decisive break would be one in which a longer-than-average candle broke out of the range and closed near its high or low, or three successive candles of the same color broke cleanly through the range top or bottom.
The targets are generated using the technical-analysis method of extrapolating the height of the range by a Fibonacci 0.618 ratio higher (in the case of an upside break) or lower (in the case of a downside break). A more generous target would come from extrapolating the full height of the range.
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