AUD/USD Technical Analysis: Bounce May Yield Short Trade Setup

AUD/USD Technical Strategy: FLAT

• Aussie Dollar break of counter-trend support hints downtrend is resuming
• Four-hour chart hints at near-term bounce before bearish follow-through
• Looking for upswing to yield improved risk/reward setup for a short trade

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Another attempt at reviving the Australian Dollar down trend against its US counterpart appears to be in progress. Prices have broken rising counter-trend support set from the swing bottom in late October, hinting that a period of corrective gains has run its course and dominant bearish bias is ready to reassert itself.

A look at the four-hour chart casts doubt on immediate follow-through however. The pair put in a bullish Morning Star candlestick pattern and bounced above immediate trend line resistance, hinting that an upswing may be in the cards before further progress downward.

Taken together, it seems like sellers may indeed reclaim the initiative before long but an opportunity to enter short with improved risk/reward parameters following a bounce might present itself. With that in mind, opting to monitor developments from the sidelines for now appears to be most prudent.

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--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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