AUD/USD Technical Strategy: FLAT
- Australian Dollar challenges resistance above 0.73 figure
- Long-term positioning still favors a broadly bearish bias
- Waiting for attractive opportunity to enter short position
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The Australian Dollar continues to recover against its US counterpart having broken downtrend resistance set from late January last week. Resistance in the 0.7304-15 area is now in focus, with a break above that confirmed on a daily closing basis opening the door for a test of the minor barrier at 0.7382 (August 21 high), followed by former support in the 0.7452-61 zone.
Initial support comes in at 0.7160, marked by a former range top and the upper layer of recently broken trend resistance. A downward reversal that takes prices back below this barrier pave the way for another challenge of support in the 0.7021-41 region, the launch pad for the latest foray to the upside.
Sizing up longer-term positioning seems to paint recent gains as corrective within otherwise broadly bearish positioning. The monthly chart reveals a break of 17-year rising trend support in June, which appears to mark continuation in a down move emanating from the peak set in mid-2011. The current upswing would need to make quite a bit more progress before the validity of that breakdown is challenged.
On balance, this argues in favor of a wait-and-see approach for now. Entering long seems to run counter to the overall trend bias. It is also unattractive from a risk/reward perspective as prices hover just below resistance. Taking up the short side appears to be premature however absent defined evidence suggesting the bounce has topped and the down move is ready to resume.
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--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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