A Minor Upturn in AUD?

AUD, Australian dollar, EUR/AUD, GBP/AUD – Technical Outlook:

  • AUD/USD is looking oversold around key support.
  • EUR/AUD and GBP/AUD are showing signs of fatigue at key resistance.
  • What is the outlook and what are the key levels to watch?

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The Australian Dollar is looking a bit oversold against the US Dollar, pointing to the possibility of some consolidation or a minor rebound in the near term. However, any such move could be short-lived as the overall trend remains pointed down.

AUD/USD is testing key support on the lower edge of a declining channel from late 2021, with the 14-week Relative Strength Index (RSI) now in oversold territory. Similar RSI levels in the past were associated with a pause in the downtrend.

AUD/USD Weekly Chart

Chart Created Using TradingView

Moreover, AUD/USD has more-or-less achieved the target of the Head & Shoulders-type topping pattern after it dropped to 0.6234 this week. This wouldn’t necessarily imply that the pair can’t fall any further – a pattern target tends to serve as a guide, rather than a rule. Indeed, a decisive break below the lower edge of the channel could pave the way towards 0.6050 (the 78.6% retracement of the 2020-2021 rise).

On the upside, a decisive break above immediate resistance at the end-September low of 0.6361 could open the door towards the early-October high of 0.6547. AUD/USD needs to break above 0.6547 for the short-term downward pressure to ease.

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Negative momentum divergence (rising price associated with declining momentum) at this week’s high indicates that EUR/AUD’s two-month rally appear to be losing steam. Overbought conditions coupled with a Doji candlestick near stiff resistance at the July high of 1.5397 on Wednesday’s daily chart raise the odds of a minor retreat.

EUR/AUDDaily Chart


Chart Created Using TradingView

A decisive break on the hourly chart below the October 11 low of 1.5390 would confirm that upward pressure had faded for now. Quite strong support is at the October 6 low of 1.5166. To be fair, any retreat is unlikely to alter the two-month uptrend while the cross holds above the 200-day moving average (now at about 1.5050).

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GBP/AUD is testing a tough converged hurdle – the 200-day moving average and a horizontal trendline at 1.7800. Negative momentum divergence (a stalling of price associated with declining momentum) is a sign that the cross may need to consolidate/retreat a bit in the short term.

GBP/AUDDaily Chart


Chart Created Using TradingView

Any break below the early-October low of 1.7345 would trigger a minor double top (the early-October highs), implying a potential fall towards 1.7000. Furthermore, a decisive break below last week’s low of 1.7244 would raise the odds of extended weakness. GBP/AUD needs to hold above key support at 1.7000 for the short-term upward pressure to remain intact.

— Written by Manish Jaradi, Strategist for DailyFX.com

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