Forex Technical Update
The 1H AUD/USD chart shows a sideways market since September 11, the start of last week's trading. A range roughly between 1.0380 and 1.0180 was established. At the end of last week, the market was knocking at resistance, but after starting this week, the AUD/USD is at the support, which is last week's low, near 1.0180. Note that the price action remained below the 200 simple moving average, and that the RSI was kept below 60, despite a minor crack on Friday. This suggests maintenance of the bearish momentum in the 1H time-frame, which represents the short-term, which is day to day and within the trading week. There are larger bearish candles than bullish ones since we started this week, so price action reflects bearish dominance. The next level of support below 1.0180 is parity, 1.0, which is psychological support. The market was able to crack it early August to 0.9926, but a sharp rejection followed which materialized into a corrective market for the rest of August. For the bearish scenario, resistance at 1.0250 should hold.
The daily chart has a double top, and some call it batman head, or cat ears. Whatever you call it, it looks like a top, especially with the inability of the August rally to penetrate the middle of the range that provided resistance in May and June. The daily AUD/USD chart also shows a forecast to 0.97, which is the 2011 low. This is a swing projection from the record high near 1.1080 to 1.0, pivoted from the August high near 1.0750. AUD/USD is a very risk-on, risk-off pair so the eurozone crisis has an indirect effect on it as well. It is also correlated to gold, and gold's inability to rally while there is risk aversion also gives AUD less of a chance to rally. Parity is in sight with projections to even lower levels.
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Fan Yang CMT
Chief Technical Strategist