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AUD/USD Technical Analysis: Aussie May Bounce Before Deeper Drop

AUD/USD Technical Analysis: Aussie May Bounce Before Deeper Drop

Ilya Spivak, Head Strategist, APAC

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

Get help building confidence in your AUDUSD strategy with our free trading guide!

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.

Australian Dollar vs US Dollar price chart - daily

AUD/USD chart created with TradingView

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.

AUD/USD Technical Analysis: Aussie May Bounce Before Deeper Drop

AUD/USD chart created with TradingView

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.

AUD/USD Technical Analysis: Aussie May Bounce Before Deeper Drop

AUD/USD chart created with TradingView

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.

AUD/USD TRADING RESOURCES

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

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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