AUD/USD Technical Analysis: Aussie May Bounce Before Deeper Drop
AUD/USD TECHNICAL OUTLOOK: BEARISH
- Aussie Dollar breaks past key support, sets sights on 2019 low
- Validation of bearish setup noted in May close on the horizon
- Near-term positioning hints bounce may precede deeper drop
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The Australian Dollar has continued to sink after taking out support guiding the upswing against its US counterpart since mid-June, as expected. In fact, prices have now slipped below support marked by the January 2016 bottom at 0.6827 to challenge the 2019 spike low at 0.6744.
This is reinforced by the 61.8% Fibonacci expansion at 0.6735, with a daily below that eyeing the 76.4% level at 0.6653. Zooming out to the weekly chart, such a move would mark validation of the downside target implied by the bearish Descending Triangle chart formation completed in mid-May.
Having said that, sellers’ conviction might wane in the very near term. Prices are within a hair of key support, making for seemingly unattractive short trade risk/reward parameters. Further, positive RSI divergence on the four-hour chart suggests immediate selling pressure is ebbing and might yield to a bounce.
Any such move faces immediate resistance at 0.6829, marked by a swing low from mid-June and trend line resistance guiding the latest down move. A close above this barrier is needed to neutralize immediate selling pressure. A bullish shift in the overall bias requires a breach of 2019 resistance, now near 0.7060.
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--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.