The 1H AUD/USD cart shows a pair that ended last week with a double bottom attempt, which followed a week of decline from about 0.9474 to 0.9275. We’ll see that this dip was significant in terms of technical development, but for now let’s look at the near-term structure.
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The double bottom looks like it is getting confirmation as price held above 0.93 to end last week, and to start this one. The way price hooked above the 5-hour SMA is also part of the first step in attempting at least a near-term bullish correction. The RSI is also pushing above 60 which reflects loss of the bearish momentum in this 1H chart’s near-term time-frame.
Falling Trendline, Fibonacci Retracement:
The double bottom sets up a bullish attempt that is now being challenged by a falling trendline. A break above 0.9340 should clear above last Friday’s high and above the falling trendline. This would signal a bullish continuation, or at least a correction toward 0.94 and the 61.8% retracement level, which is a few pips away.
In the near-term, it looks like there is a possibility of a bullish breakout. What would this breakout be in terms of the bigger picture? Let’s take a look at the daily chart to see where we are in terms of the long-term, price action since the past year.
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The daily chart shows a market that was bearish in 2013, but looks like it has turned bullish in 2014. However, last week’s dip break below a key support at 0.9322. This is the first breakdown of a key support on its way up in the 2014-bull-run.
However, the bullish signs are still there:
1) Moving averages are in bullish alignment.
2) Since tagging 70 in April, the RSI has held above 40 except for a brief violation in May. This reflects maintenance of the bullish momentum.
So, we are dealing with a market that is mostly bullish in 2014, with some early signs that the market is turning sideways-bearish. In the near-term, price action looks bullish, and has the 0.9340 level to break to open up the 0.94-0.9410 area. If price pushes above 0.94, there is more bullish signs than the 1 bearish one we had from last week’s dip. Therefore, we should probably have more bullish bias than a bearish one based on the technical pictures from the daily chart down to the 1H chart, especially if price is able to push above 0.9340 and break the very short-term falling trendline.
However if price does not break above 0.9340, or retreats sharply after breaking it briefly, there is downside risk to the next key support around 0.92.
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