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Talking Points – AUD/USD, AUD/JPY, EUR/AUD, RSI Divergence

  • Broadly speaking, most Aussie crosses are experiencing fading momentum on the daily charts
  • AUD/USD and AUD/JPY rising momentum is ebbing, hinting of a turn lower to come ahead
  • EUR/AUD downside momentum is reducing after the completion of a bearish reversal pattern

AUD/USD Technical Outlook: Slightly Bearish

After pushing above the falling trend line from February, the Australian Dollar paused its ascent under the descending resistance line from July. The former may be a bullish warning hinting of a major reversal to come after AUD/USD spent most of this year descending. However, the latter is keeping the pair at bay and a signal warns that its next move could be lower.

Negative RSI divergence has formed at AUD/USD’s most recent peak, showing that upside momentum is ebbing. This could precede a turn lower and would have prices eyeing 0.72026 as support followed by the November 13th low. Should prices continue climbing though, pushing above resistance exposes the August 21st high at 0.73818 followed by the highs set in July. The outlook will have to be slightly bearish.

AUD/USD Daily Chart

AUDUSD DAILY CHART

AUD/JPY Technical Outlook:Slightly Bearish

AUD/USD isn’t the only Aussie cross that is showing fading signs of upside momentum, negative RSI divergence also exists in AUD/JPY prices. Against the Japanese Yen, the Australian Dollar finished this past week at its highest since late July. But the RSI divergence is undermining the pair’s upside progress. Should it turn lower, I would keep a close eye on the rising support line from October.

A descent through it would open the door to testing the November 21st low at 81.20. In the event AUD/JPY continues rising, it faces a range of resistance between 83.44 and 83.93 next. These consist of the highs achieved in July. An ascent through the barrier exposes the May and June highs around 84.48 afterwards. With that in mind, the AUD/JPY technical outlook is slightly bearish.

AUD/JPY Daily Chart

AUDJPY DAILY CHART

EUR/AUD Technical Outlook:Slightly Bullish

On the flipside of AUD/USD and AUD/JPY stands EUR/AUD. A couple of weeks back, I noted the formation of a Double Top bearish reversal pattern. Since then, not only has the Euro reached the target of the pattern, but more downside progress was made against the Australian Dollar. EUR/AUD has breached the range of lows from August, opening the door to reaching the June low at 1.52755 and perhaps beyond.

But, here the pair is overshadowed by positive RSI divergence which shows decreasing downside momentum. As such, this could precede a turn higher towards 1.5772. Climbing above that exposes a former range of support between 1.60128 and 1.59855. Thus, the EUR/AUD technical outlook will have to be slightly bullish.

Taking all of the pairs mentioned above into consideration, the Australian Dollar could be setting itself up for broad weakness in the week ahead. Those that are betting on more Aussie strength may want to err on the side of caution.

EUR/AUD Daily Chart

EURAUD DAILY CHART

** Charts created in TradingView

--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter