EUR/AUD has endured some rough waves – prices fell from 1.27 to 1.24 during early Jan, and recovered back above 1.27 during mid Jan, and finally pulled lower to where we are currently – Just along the Kumo edge.
The Kumo has traditionally provided some weak support/resistance, but in this particular instance, it appears that support from the current Kumo is stronger than most. (see 11th Jan). Just yesterday price was heading back into the Kumo, only to be rejected close outside of it. Should price bounce off the Kumo higher, together with the bullish Kumo (green) still at play, we should see a return of a bullish rally back up to test 1.28. However, not all is bright and cheery for the bulls, as price is trading lower than the Chikou Span (Cyan), which is currently flat and also below the level when the strong bearish breakout occurred. This is a bearish threat and could push price deeper into the Kumo. Flip it the other way, should price rally now, Bullish Kumo Bounce can be confirmed by trading above the Chikou Span line, giving us an even stronger bullish bias.
Weekly chart shows that price is trading within the Kumo, with a potential of a bullish Kumo Breakout should price rally from here. This give us the same bullish optimism similar to what the Daily Chart showed us – should price rally from here that is. Also, the current bullish Kumo is also threatening to break significant resistance in the form of 1.25, hence a rally from here will give us multiple breakthroughs using Ichimoku.
In the event of price heading lower, we’ll see both Daily and Weekly candles trading wholly within the cloud, which is generally considered unpredictive. Hence traders should beware and not treat a non-bullish indication as automatic bearish.