AUD/USD Technical Strategy: BEARISH
- Australian Dollar rejected after multiple tests of four-month resistance
- Break of support from April swing low hints at probe below 0.71 ahead
- Downswing might develop into long-term bearish trend resumption
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The Australian Dollar recoiled from resistance guiding it lower against its US namesake since early December. The drop followed several days of grinding forays to the upside that ultimately fizzled. What’s more, progress proved to be elusive despite a supportive fundamental backdrop. That gives the currency pair’s subsequent retreat an air of capitulation.
Continued progress to the downside faces rising trendline support set from early March (now at 0.7088) but the true test of sellers’ mettle comes in the 0.6982-7021 area. A daily close below this would confirm the formation of a bearish Descending Triangle chart pattern carved out since late 2018. That would speak to the resumption of the structural decline launched in January 2018.
Turning to the four-hour chart, there seems to be adequate momentum to at least begin attempting such a move. Prices have broken well-established support from the April 2 swing bottom. That seems to set the stage for a test below the 0.71 figure to challenge the March-based trend line, followed by the 0.7049-73 congestion area. A close above 0.7207 probably neutralizes immediate bearish pressure.
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--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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