AUD/USD Technicals – Trading below 0.95 on short-term bearish pressure

AUD/USD is currently within a support consolidation zone between 0.944 – 0.95 after breaking below the descending Channel yesterday. Price retraced back towards the descending Channel during US trading hours on the back of stronger US Stocks which led to a fall in USD. However, the rally was not strong enough to push price back up into the descending Channel, forming a shooting star Candle which pushed price lower just as USD made a technical rebound. With US FOMC decision coming later, it is no surprise that traders do not wish to lean heavily on either bullish or bearish direction, with price finding support once again on 0.944 during early Asian hours. This allowed bulls to reorganize themselves to push higher, but overall bearishness remain as current price levels looks likely to be rebuffed by Channel Bottom once more.

Hourly Chart

From a technical basis, AUD/USD is certainly bearish. This can be seen from the fact that the USD weakening yesterday failed to do anything notable for the bulls but only confirmed the Channel breakout for the bears. This is a stark contrast to EUR/USD which managed to reach a fresh 3 month high on the same move. Nonetheless, current bullish move may not be over until a proper test of Channel Bottom is made. Stochastic readings continue to point upwards, which suggest that the bullish correction is still underway. However it is possible that Stoch readings may enter overbought territory when a proper test of Channel Bottom (and possibly confluence with 0.95 round figure) occur. This enhances the resistance’s strength and may entrench current short-term bearish outlook.

Weekly Chart

From the Weekly Chart, the inability to hold above 0.96 is disappointing, and makes the case for a reversal towards 1.01 much harder to convince. Current price is also below the body of the previous week. which is a first-level invalidation of the bullishness of last week’s setup. Stochastic reading is still pointing higher, but Stochastic counter-trend signals tend to be unreliable especially during strong exceptional trend movements (judge for yourself whether 5 consecutive W/W loss constitute an exceptional trend movement). Furthermore, there remains a chance where readings may form peaks within Oversold regions (though this is generally rare under Weekly Chart), which will help the case for further bearish movement which may break 0.938 and open for the scenario of a 0.933 2013 low once again.

There are some evidence that a dovish Fed’s decision at today’s FOMC announcement has been adequately priced in. This implies that any less dovish than expected FOMC this round may result in a strengthening of USD in the near term. Given that AUD/USD remains bearish during recent USD weakness, a stronger USD movement will spell doom for AUD/USD bulls and could be the impetus that bears are waiting for to send AUD/USD further down in quick succession.

More Links:
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