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AUD/USD Channel Is Going Down on Daily Chart

April 8, 2012 (Last updated on September 9, 2018) by

The Australian dollar is supplying some interesting patterns nowadays. Last week it was H&S on AUD/JPY, today it’s a descending channel on the daily chart of AUD/USD. The currency pair has entered the downward trend in early March, following a consolidation after a rather long-running uptrend.

The borders of the presented channel pattern are rather rough and there is a high probability for false breakouts, even when using a 10% buffer zone. Also, the descending channels aren’t very well suited for trading the upward breakouts, so I wouldn’t suggest trading on the bullish side here.

As you can see on the chart below, the yellow lines mark the borders of the channel. The cyan lines mark the 10% buffer zone for entering a breakout trade, while the green lines mark the target levels for taking profit. The green lines are located at 100% of the channel height away from its border. The breakout bar will show us the stop-loss level with its high (considering a bearish breakout). Click on the image below to see a full-size chart of this pattern:

Descending Channel on AUD/USD @ D1 as of 2012-04-08

Update 2012-04-12: Entered long position at 1.0398 with the stop-loss at 1.0298 (low of the breakout bar).

Update 2012-04-23: Exited at stop-loss with 1 pip of slippage (1.0297).

Update 2012-04-27: Could have used another stop-loss — the bar before the breakout as only about 15% of the breakout bar traded inside the channel — but that is another story. In this case, the trade would reach a moderate TP today.

If you have any questions or comments regarding this AUD/USD chart pattern, please feel free to reply via the form below.

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