AUDUSD has been in a downward trend since the beginning of the year. Within 10 months the pair dropped 1,100p, setting last Friday at the level of 0.7020 minimum of the year. Friday’s candle covered completely the Thursday candle, creating the formation of the Engulfing Bar called also Outside Bar The direction in which the price leaves the formation may be the key to the fate of this pair.
Looking at the H4 chart, we can determine at the level of 0.7055 strong local support (green zone).
It seems that increases are very likely, which results from the confluence of events:
– Outside Bar is created by a bullish candle
– the OBar candle is at the same time a Pin Bar
– there is a divergence (+) on D1
I would look for an opportunity to open a buy order as close as possible to the green support zone if the price reaches it. The second option is the confirmed break out from the OBar formation. In any case, SL should be below the lower limit of the formation, which is also the minimum of this year 0.7020.