(Chart courtesy of FX Solutions' FX AccuCharts. Price on 1st pane, Slow Stochastics on 2nd pane; uptrend lines in green; downtrend line in red; Fibonacci retracements in grey; 20-period simple moving average in light blue.)

3/12/2008 – AUD/USD – A quick glance at the long-term AUD/USD weekly chart, as shown, provides some significant technical indications that the most recent rally that began around the beginning of the year has possibly reached a point of exhaustion. The well-defined parallel uptrend channel that has been valid from at least early 2002 to the present (represented on the chart by the parallel green lines) has been touched in a very precise manner at least three times on each side. The most recent touch of the channel’s upper resistance line occurred just late last month, followed by a turn back down. Oscillators like the displayed Stochastics are also lending much strength to this mid-term bearish outlook, as price is currently overbought and pointing unmistakably down. Therefore, from purely a technical perspective, the directional bias appears to be to the downside. If this indeed becomes the case, it would mean a long-awaited correction in the dollar’s recent freefall. And if this correction follows through, the next major support to the downside resides around the 38.2% Fibonacci retracement level (the low-to-high retracement level being measured from the swing low on 1/22/2008 to the long-term high reached on 2/28/2008).

James Chen

Chief Technical Analyst

FX Solutions

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