Forex Technical Update
Double Top Attempt:
- The AUD/USD is seen in the 1H chart attempting a double top.
- This double top would be formed if the market can break below the parity, 1.0 support level.
- The RSI breaking below 40 helps confirms the lost of bullish momentum, and reflects a correction decline.
- A double top breakout projection targets 1.0920-1.0925 area.
- If the market contains the market above 1.0875 and rallies back above 1.1080, we continue to confirm the bullish projections towards 1.1590, 1.1690.
- If the market is to maintain the bullish outlook in the medium term, this short-term bearish correction should not break below 1.0875.
- Notice 61.8% retracement level just above 1.09.
- Looking at the 4H chart. A break below 1.0875 will invalidate the bullish impulse wave count presented, but not necessarily invalidate the bullish mode. A break below 1.0790 however suggests a failed confirmation to the upside, and likely start a decline back to 1.0440 in the context of a range-bound market.
- As a USD-cross, the main risk event is today's House vote on John Boehner's US budget plan set at 6:00PM ET.
- This is unlikely going to pass, and pressure on the USD could push the greenback lower. If it does not pass today, we have just 3 working days to reach an agreement.
- The debt ceiling vote itself can take minutes so we can see a last minute vote on the ceiling, without a good plan yet, which still has downwards pressure on the USD. The only thing going for the greenback is the fact that the market has already been pricing in this, so it would not be too surprised. Maybe the biggest USD-negative swings due to this debt crisis is over. (Unless Moody's, Standard and Poor's, or Fitch follows through the warning and cuts the US credit rating for the first time in history.). This can be extremely USD-negative, and definitely makes the case for 1.1590, 1.1690 and beyond.
Does Boehner's Plan actually have a chance to pass House, Senate AND Obama? Not likely. What do you think? Subscribe and become a member to share your views and join live discussions as well as webinars about the markets.
Fan Yang CMT
Chief Technical Strategist