AUD/USD Breaks a Falling Channel and Tests Triangle Resistance

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AUD/USD Breaks a Falling Channel and Tests Triangle Resistance

Tight and Slightly Bearish
The AUD/USD was slightly bearish this week, falling from roughly 0.8830 to 0.8720. This range of about 110 pips is relatively small for an entire week, but the AUD/USD has been consolidating in October, and the volatility has declined.

AUD/USD 1H chart 10/24
audusd 1h chart 10/24
(click to enlarge)

Channel Breakout:
This week, it has been declining choppily within a falling channel. However, today’s price action broke above this falling channel, pushed the RSI above 60, and is now above the cluster of 200-, 100-, and 50-hour SMAs.

These are all signs of a shift toward a bullish outlook, but this outlook will be limited because of the overarching mode of consolidation and the prevailing downtrend heading into October’s consolidation.

AUD/USD 4H Chart 10/24
audusd 4h chart 10/24

(click to enlarge)

Triangle Resistance:
When we look at the 4H chart, we can clearly see the sideways action in October. The moving averages reveal that the trend was bearish before. As price bounces off essentially 08750 we can see that it is respecting a triangle support. As it breaks above 0.88, it is breaking the triangle to the upside. This is showing some volatility after a few weeks of coiling.

The next key resistance within the October range will be the 0.8850 and the 0.89 levels. We should respect the mode of consolidation in AUD/USD. That might mean to stay away from it for a while. But let’s see if it can push above 0.89. I think in the 0.8850 to 0.89 area, we can look for resistance for a very short-term bearish attempt. Even though the prevailing downtrend is intact, the 0.8660 area was the 2014-low, and price cracked it in October, but is still holding above it. So a break below 0.8640, or a break above 0.89 will be needed to give the AUD/USD a sense of direction.

AUDUSD Daily Chart 10/24
audusd daily chart 10/24

(click to enlarge)

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.