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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

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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.

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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