After a strong bearish rejection candle trade that we discussed in the war room ‘chart of the day’ commentary, the market sold off aggressively into lower prices. Now would be a good time for those in the AUDCHF short position to consider taking profits.
Price is now testing the ‘floor’ on the chart here as it moves into a major support level on the daily chart. We can see by zooming out how this level has acted as strong support before. We are waiting to see how price is going to react with this level.
If the market breaks through, we don’t want to chase price and sell into the breakout because this is a high-risk area for a market breakout trap to occur. If a breakout trap occurs, meaning that the market tries to push below this level but can’t maintain the lower prices and closes higher, then we could consider that the support level is holding and the bears are ‘out of steam’. We just have to sit on our hands and wait to see how the price action reacts in the upcoming trading sessions.