AUD/USD traded higher on Monday, after hitting support at 0.6967 on Friday. However, the pair is still trading below the downside resistance line taken from the high of Jan.20, as well as below the key resistance zone of 0.7090, which acted as a decent floor between Dec. 14 and Jan. 24. In our view, this keeps the short-term outlook negative.
Even if the recovery continues for a while more, we could see the bears taking charge again from near the aforementioned downside line, or the 0.7090 zone. This could result in declines back near the round figure of 0.7000, or Friday’s low of 0.6967. A break lower could confirm a forthcoming lower low and may pave the way towards the 0.6924 barrier, which provided support between July 7 and 14, 2020. Slightly lower lies the inside swing high of June 25, at 0.6895, the break of which could pave the way towards the low of June 30 at 0.6825.
Taking a look at our short-term oscillators, we see that the RSI, although below 50, points up and appears ready to climb back above that line, while the MACD, although negative, lies above its trigger line, pointing up as well. Both indicators detect slowing downside momentum and support the notion for some further recovery before the next leg south.
Now, in order to start examining the bullish case, we would like to see a clear break above 0.7090. This could also confirm the break above the downside line and may see scope for advances towards the 0.7175 zone, marked by the highs of Jan. 25 and 26, the break of which could allow extensions towards the 0.7215 barrier, marked by the high of Jan. 21. Another break, above 0.7215, could trigger extensions towards the peak of Jan. 20, at 0.7275.
