Forex Technical Update
The AUD/USD is starting the week with a bearish breakout from the triangle formed through the latter half of last week. So far as we enter the US session, the market has retraced 61.8% of last week's rally at 1.0526. The RSI in the 1H chart shows that the momentum has NOT been persistently bullish and is turning sideways. With a dip below 30 and price dipping below the 200 hour simple moving average, we might be turning bearish in the short-term. The bearish outlook can be confirmed if there is a pullback that fails to break back above 1.0625, the middle of the triangle. Preferably the market respects 1.06, which would be clearer that the bears are in charge, then a slide under 1.05 psychological pivot at least brings this market to a sideways mode if not a bearish correction.
The 4H chart shows that although the decline looks impressive in the short-term, it is still within a rising channel that started mid-December 2011. The RSI shows a bullish market as it remained above 40, and most of the time above 50, while tagging 70. As the RSI nears 40, we can expect some support, even if the rally to follow can not extend the previous uptrend but rather just a pullback. However, if the market breaks below 1.0500 and RSI falls below 40, we are looking for a retest of the 1.0380 pivot and looking for at least a sideways if not bearish market, and our bullish target from last week should be shelved.
If the market does continue the bullish trend (stay above 1.05, RSI in 4H stays above 40), the next important resistance is 1.0763, so for reward to risk assessment, this should be the maximum target for the short-term, though a break above does open up more room to the upside.
Fan Yang CMT is the Chief Technical Strategist of IBTRADE and FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.