Forex Technical Update
The AUD/USD indeed found support near 0.94 as earlier anticipated. The bounce was a sharp rally followed by a more subtle climb. The 1H chart shows that this climb is finally rejected below the 61.8% retracement of the bear run from 0.9985 down to 0.9387 - 0.9750. Note that the RSI has pushed above 70, so if the market were to signal a bearish continuation it will need to push the RSI back below 40, and then below 30.
Further Recovery: Otherwise, we are still vulnerable to further recovery, if not to the upside, possibly a sideways one. The upside recovery opens up further if the market can clear above the 0.9760 level, therefore above 61.8% retracement. Then if 0.9700 becomes support, we can be in pullback toward parity.
Medium Term Bearish Outlook: Heavy price action can be a harbinger to further downside intent in the medium term. A break below 0.95 might be necessary to convince the market that the consolidation this week is over. Of course, then you have a test of 0.9380-0.94. A break below this support is very significant. The weekly chart shows that this is breaking below this opens up 0.9222, 61.8% retracement of the bull run since May 2010 to July 2011. Below that, we have the 0.90 psychological pivot, which should be right above the 200-period simple moving average, which is closer to 0.8920.
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Fan Yang CMT
Chief Technical Strategist