AUD/USD Technical Outlook
- AUD/USD coming off big long-term support to the start week
- Risk trends likely to dictate if and when it breaks
AUD Technical Outlook: AUD/USD Holding Long-term Support, For Now
At the very tail end of January as markets were in full-on risk-off mode, AUD/USD tested a very important threshold of support at the 7000 line. A level that has been in play since October of 2018. The floor along with a recovery in risk appetite has the Aussie now heading towards trend resistance.
The trend-line running lower from the October peak is likely to come into play any day now. It isn’t a time-tested threshold like support is, but given the wedging price behavior going on in recent months the trend-line could make up the top-side line of a wedge.
For this scenario to grow legs we will need to see AUD/USD weaken around the trend-line. A turn back lower would tighten up the range even further bringing a full-fledged wedge into play. The point where this would become of significant interest is still a few weeks off as the pattern needs more time to develop. But nevertheless it could make for a powerful set-up.
The descending nature of the pattern and general downtrend since last year suggests it would lead to an eventual break of the 7000 line, but it is too soon to make that call. It could lead to an eventual breakout to the upside.
Or, we may see nothing at all happen with regard to the further development of this pattern, as AUD/USD may continue to trade higher with little regard for the trend-line. We will need to pay close attention to momentum as the line gets tested.
If the trend-line doesn’t hold as resistance in the days to come, then look for the Jan high at 7314 as the next level of resistance. That high is followed by confluent resistance consisting of the 200-day moving average and nearly one-year trend-line running down from late Feb last year.
AUD/USD Daily Chart
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
