AUD/USD fell sharply yesterday after hitting resistance slightly below the 0.7458 barrier, marked by the high of Wednesday. Today, the rate fell below the 0.7345 barrier, marked by the low of Apr. 18, thereby confirming a forthcoming lower low. This, combined with the fact that the rate is trading below a downside line taken from the high of Apr. 5, paints a negative short-term picture in our view.
We believe that the dip below 0.7345 may have opened the way towards the 0.7245 zone, marked by the low of March 8th. If the bears are unwilling to stop there, then a lower break could extend the trend towards the low of Mar. 15, at 0.7165. Another dip, below 0.7165, could set the stage for more declines, towards the low of Feb. 24, at 0.7095.
Shifting attention to our short-term oscillators, we see that the RSI lies near its 30 line but shows signs of turning up, while the MACD lies below both its zero and trigger lines, pointing down. Both indicators detect downside speed, but the fact that the RSI shows signs it could turn somewhat up makes us careful of a potential bounce before the next leg south.
On the upside, we would like to see a strong rebound back above 0.7458 before examining whether the bulls have stolen the bears’ swords. This will confirm the break above the aforementioned downside line and a forthcoming higher high on the 4-hour chart.
The next stop may be at 0.7493, marked by the high of Apr. 12, the break of which could aim for the 0.7535 territory, which acted as a strong resistance between March 25th and 30th. If the bulls don’t want to stop there, we could see them climbing towards the high of Apr. 6, at 0.7593, which could extend the advance towards the high of the day before, at 0.7660.
