Forex Technical Update

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AUD/USD 1H Chart 5/11/2012 11:45AM EDT

AUD/USD

The AUD/USD was in a corrective rally trading in an upward channel during the 5/9-5/10 trading session. As we entered the 5/11 trading session, the market fell below the correction pattern and cracked this week's low at 1.0019, but only barely. It held above 1.0015 and is now back to the 1.0070 area, which was a pivot during the 5/9-5/11 period where the decline slowed up. 

It should be noted that the latest bearish swing failed to push the RSI below 30, which would have confirmed bearish continuation momentum. Instead, it shows that although the short-term momentum is still bearish, it is losing strength.

AUD/USD 4H Chart 11:50AM EDT 5/11/2012

AUD/USD

The 4H chart shows a market in a declining channel. The RSI in this time-frame also failed to tag 30 in the latest swing. It is also showing an extended bullish divergence between price and RSI. Also, the price has been tagging the lower bollinger band which is a showing of strength to the downside, but also a shorter-term sign that the market may be oversold. Now price stays within the band, showing another sign that there could be exhaustion from the bear run.

Furthermore, price action shows that a double bottom might be forming. Right now, the resistance for this double bottom will be at 1.0143. A breakout projection using the width of the pattern points toward 1.0270. However, we should also monitor the 50% retracement at 1.0244 as well as the previous support zone to be tested as resistance in the 1.0225-1.0240 area.

A break above 1.03, and thus the 61.8% retracement of the latest downswing in the 4H chart, would suggest shelving the bearish outlook.

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Fan Yang CMT is a trader, analyst, educator and Chief Technical Strategist for FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.

Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.