AUD/USD Technical Strategy: NET SHORT AT 0.7547
- Australian Dollar looks poised to test resistance near 0.7370
- Upswing looks to be corrective within a broader down move
- Looking for signs of bullish exhaustion to add to short trade
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The Australian Dollar is back at trend resistance following a bounce from 20-month lows against its US namesake. Downtrend resumption may be next. The pair recovered following the appearance of positive RSI divergence, as expected.
Looking at the four-hour chart, it appears as though the near-term bottom took the shape of a Head and Shoulders (H&S) pattern. The setup implies a measured upside objective near 0.7370. Advancing to this point would conveniently double as a retest of recently broken Triangle support.
Turning to the daily chart, an upswing of the kind implied by the 4-hour H&S formation would also mark a return to dominant downtrend resistance, now in the 0.7339-0.7412 area. Failure to break past it might mark the start of the next phase in the longer-term decline.
The AUD/USD short trade initiated at 0.7608 and then scaled up near 0.7530 remains in play. Price action will be closely monitored for opportunities to add to exposure once the current upswing shows signs of exhaustion, which might take the form of breaking counter-trend support set from the August 15 low.
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--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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