AUD/USD Technicals – 0.96 Key for bulls as short term bears fighting back

AUD/USD received a new lease of life last week. Despite the early week scare which pushed price way below the 0.938 final support (see weekly chart below), price managed to recover significantly, climbing back up above 0.96 at one point, but ultimately failing to hold onto the level. If one were to do a weekend review of the markets, they will notice that Australia’s economic data released last week were mostly stronger than expected. One can easily put 2 and 2 together to come to the conclusion that AUD/USD rallied because of the stronger fundamentals. However, as discussed last week, this explanation doesn’t address the earlier sell-off after the better numbers were released, which suggest that traders were disregarding the positive news, and were in favor with the broader bearish sentiment plaguing AUD.

Hourly Chart

Perhaps a better explanation would be the weakening of USD towards the 2nd half of last week. However that relationship wasn’t visible last Friday with AUD/USD climbing higher despite USD strengthening on weakening stocks. It does seem to suggest that the key culprit for current recovery could simply be a case of strong technical rebound, as AUD/USD has endured 5 consecutive weeks of selling prior to last week. Hence it is not surprising to see price pulling up from a low of 0.933 to 0.96 amidst overall bearishness. There is evidence for this theory, as latest price action suggest that current bullish run may be expiring with price forming lower lows and lower highs since Jun 14th peak.

Looking at pure technicals alone, price is currently within a descending channel. Yet price is also trading above the rising trendline that represents current recovery (or technical rebound). Ultimately, price may need to trade below current rising trendline and preferably below 0.956 (where rising trendline confluence with 12th Jun peak) to confirm that bullish correction is over.

Weekly Chart

Weekly Chart is slightly bullish with last week’s Spinning Top candlestick suggesting that bears strength are decreasing. However, price will need to clear the 0.96 level convincingly this week in order to open up 1.01 as a viable bullish target. Stochastic Indicator is hopeful with readings pointing higher with divergence between Stoch/Signal lines suggesting that bullish momentum is gaining pace. However, similar to price action, Stoch line need to clear its own “resistance” of 20.0 in order to signal the start of a bullish cycle, which will be likely achieved should price close much higher than 0.96 this week.

More Links:
EUR/USD Technicals – Short Term uptrend in danger
Week in FX Americas – Fed’s Communication Skills Better Be Sharp
Week in FX Asia – Bank of Japan Dissapoints Markets with Inaction Yen Rises

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