Forex Technical Update
The 4H AUD/USD Chart shows the market rallying after creating a new 2011 low near 0.9621. The rally followed a bullish divergence,l broke above the 0.9870 pivot, and is now more than 38.2% retracement of the latest 5-wave decline (impulse wave). Note that this is the 2nd impulse wave down during the bearish market where the 4H RSI remained below 60. That means likely have completed a wave 3 of a developing bearish impulse wave. That also suggests that we are in a wave 4, which should not overlap wave 1, so resistance should not be higher than 1.0170 if the bearish outlook is to remain clear. Therefore, a break above parity does not mean the bearish mode is over, but a break above 1.0170 does weaken the case for bearish continuation.
The daily chart shows that the current impulse wave could be part of a larger impulse wave development to the downside. If that is true, the pending wave 4 and 5 would complete a large wave (III) swing. However, at this point, it is not clear if this is going to be wave (III), or simply the wave (C) of a zig zag correction. A subsequent pullback can provide clues, like staying below 0.9950.
For now, the short-term outlook is bullish, medium-term outlook is bearish pending resistance found below 1.0170, while the long-term outlook is unclear, but has a slightly bearish bias as the market trades under the 20o-period simple moving average in the daily chart. The RSI also shows a bearish market as it tags 30, but failed to break above 60 and has now tagged 30 again.
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Fan Yang CMT
Chief Technical Strategist