- AUD/USD turns from key support pivot- rebound testing initial resistance
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The Australian Dollar fell more than 5% off the January highs with price responding to daily support on heels of last night's RBA (Reserve Bank of Australia) interest rate decision. The rebound is now testing initial resistance and we're looking for further evidence to validate the recent turn in price.
AUD/USD Daily Price Chart
Technical Outlook: Earlier this week I noted that the Aussie was testing a key support barrier at, " 7735/50 - a region defined by the 52-week moving average and the 2017 March high. " Price turned from this threshold yesterday with the advance now testing initial resistance at the former February slope support, currently around ~ 78 3 0 s. We've been tracking some slight divergence on the February & March lows with the momentum profile further highlighting the risk of a more prominent reversal here.
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AUD/USD 120min Price Chart
Notes: A closer look at Aussie price action highlights a proposed ascending pitchfork formation extending off the lows with the recent advance now testing confluence resistance at 7825/30 where the 1.618% extension converges on the 50-line. Look for interim support at 7787 with our near-term bullish invalidation now raised to the monthly open at 776 1 .
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A breach higher from here targets 7874 backed by the median-line / 50% retracement at 7924 - a close above this threshold is needed to suggest that a more significant low is in place with such a scenario targeting 7985/92 backed by the 2017 high-day close at 8054 .
Bottom line : We're looking for evidence that a near-term low is in place and we'll favor fading weakness while within this near-term formation. From a trading standpoint, I'll be looking for a pullback here to offer favorable entries targeting a break higher. Keep in mind we still have the release of Australian 4Q GDP and U.S. Non-Farm Payrolls (NFP) on tap this week- expect volatility.
For a complete breakdown of Michael's trading strategy, review his Foundations of Technical Analysis series on B uilding a T rading S trategy .
Relevant Data Releases
Other Setups in Play
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- Written by Michael Boutros, Currency Strategist with DailyFX
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