Forex Technical Update
Parity Resistance: The AUD/USD drove through the 0.9983 pivot to the parity level, but failed to sustain above 1.0. The 1H chart shows the market consolidating in what appears to be a flag pattern over the Tuesday Asian-European session.
The 1H chart shows the AUD/USD testing a risk trendline. Below this trendline, we also have a pivot at 0.9875, seen as resistance on Sept. 29, and Oct. 7. Now it will be tested as support. Note that this is near the 23.6% retracement level at 0.9866. The next fibonacci retracement support is 0.9775, 38.2% retracement, and we see a cluster of the 200-period simple moving average with the 50% retracement level at 0.97. 0.97 is an important pivot indeed seen in the 4H chart. A break below this might suggest the end of the correction rally, and bring back the 0.94 low as a short-term target. This would suggest a flat correction, since the rally ended just above 38.2% retracement.
Extended correction rally: A larger degree correction rally can push to 1.0170, the 200-period simple moving average seen in the 4H chart, between 50% and 61.8% retracement. 1.0170 is also support on Sept.14, 15, and 20, so it will be interesting to see if it becomes resistance. A break above is still in the context of a correction to the decline since the 1.0767 pivot, but a rally above 1.0250, 61.8% retracement can weaken the case and suggest a longer-term range-bound market instead of the bearish market it has established since late July.
Fan Yang CMT is the Chief Technical Strategist FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.