Forex Technical Update
The AUD/USD indeed formed a double bottom (as seen in the 4H chart) and followed through with a rally to end 2011. This rally also popped up above a triangle seen in the daily chart. As we begin trading in 2012, the market appears to be set for a throwback to test whether this breakout will sustain. The 1H chart shows the market rejected at the upper bollinger band as the RSI also popped up above 70. If we expect movement back toward the mean price action, we can look toward 50% retracement and/or the 200 hour simple moving average. In this case, a throwback would be looking at the 1.0155 area as a target. However, sometimes if the correction is flat, it just goes to 38.2% retracement, which is 1.0181, and let the 200SMA catch up.
In any case, if the market can stay above the 200 hour SMA, the bullish scenario still looks good in the short-term to follow through with extension of the upside triangle break. Back to the upside, the market has a short-term target of 1.0330 - 1.0336 (61.8% retracemet), which is the next resistance. Note the 200 day SMA right above near 1.04, which can be the market aggressive target. A break above 1.04 then opens up a more aggressive target toward the 1.0770 resistance. Also be aware of the swing projection toward 1.06, and 78.6% retracement near 1.0519 for very short-term pivots. If the market can stay above the 200 day SMA we can expect further follow through.
Fan Yang CMT is the Chief Technical Strategist FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources