AUD/USD Bearish Butterfly Pattern: High-Probability Short Setup
We identify a Bearish Butterfly Harmonic pattern forming on the AUD/USD chart, which could provide a profitable short trade opportunity. Here's a breakdown of the strategy:
1. Harmonic Pattern Formation
The pattern follows specific Fibonacci retracement and extension levels, with key points outlined:
Point X: The start of the upward movement.
Point A: First bullish impulse.
Point B: A correction to around the 0.618 Fibonacci level of XA.
Point C: A smaller bullish movement, retracing to 0.786–0.886 of AB.
Point D: Projected to form near 0.6900, signaling the end of the bullish cycle and a potential reversal.
2. Reversal Confirmation at Point D
TDIGM Oscillator: Overbought readings near 70 suggest the market is stretched and ready for a correction.
Fibonacci Resistance: Point D coincides with key Fibonacci extensions, reinforcing the bearish bias.
Candle Patterns: Look for reversal patterns like bearish engulfing or shooting star for additional confirmation.
3. Short Entry
Ideal Entry: Between 0.6880 and 0.6900 after confirmation of resistance.
Stop Loss: Above 0.6950 to protect against potential continuation of the bullish trend.
4. Price Targets
First Target (T1): 0.6644 (Fibonacci 0.618 level and dynamic support).
Second Target (T2): 0.6461 (Fibonacci 0.786 level).
This Bearish Butterfly pattern presents a highly probable shorting opportunity on the AUD/USD. With strong confluence of technical signals around the 0.6900 level, careful entry and risk management could lead to a highly profitable trade. As always, monitor price action closely on lower timeframes for additional confirmation.
1. Harmonic Pattern Formation
The pattern follows specific Fibonacci retracement and extension levels, with key points outlined:
Point X: The start of the upward movement.
Point A: First bullish impulse.
Point B: A correction to around the 0.618 Fibonacci level of XA.
Point C: A smaller bullish movement, retracing to 0.786–0.886 of AB.
Point D: Projected to form near 0.6900, signaling the end of the bullish cycle and a potential reversal.
2. Reversal Confirmation at Point D
TDIGM Oscillator: Overbought readings near 70 suggest the market is stretched and ready for a correction.
Fibonacci Resistance: Point D coincides with key Fibonacci extensions, reinforcing the bearish bias.
Candle Patterns: Look for reversal patterns like bearish engulfing or shooting star for additional confirmation.
3. Short Entry
Ideal Entry: Between 0.6880 and 0.6900 after confirmation of resistance.
Stop Loss: Above 0.6950 to protect against potential continuation of the bullish trend.
4. Price Targets
First Target (T1): 0.6644 (Fibonacci 0.618 level and dynamic support).
Second Target (T2): 0.6461 (Fibonacci 0.786 level).
This Bearish Butterfly pattern presents a highly probable shorting opportunity on the AUD/USD. With strong confluence of technical signals around the 0.6900 level, careful entry and risk management could lead to a highly profitable trade. As always, monitor price action closely on lower timeframes for additional confirmation.
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