AUD/USD – July’s Trendline Holding the Bearish Bias

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The AUD/USD is trading at the crossroads, consolidating since retreating from the 2014-high at 0.9505. However, the correction has been limited as price held below June’s consolidating low at 0.9321. Still, as you look at the 4H chart, you see a bearish bias brewing.

AUD/USD 4H Chart 7/21
audusd 07212014 4h chart

(click to enlarge)

1) July’s falling trendline is the first sign. Showing ability to make lower highs reflect weaker and weaker bulls in the market. The lows have been relatively similar, around 0.9340, which shows that bears are not strong enough to start a bearish outlook.

2) Price essentially tested the 0.94 handle today and held below. Price is also trading under the moving averages after today’s rejection.

3)  Note that on Friday, there was a “whippy” candle that ranged from 0.9365 to 0.9415. This week the market is breaking below that mini-range, showing bearish bias in the near-term.

4) The RSI is not a good sign of direction at the moment. But after it has tagged 30, it has failed to tag 70, which reflects a very slight bearish bias in momentum.

This week, the theme for AUD/USD will be whether the 0.9320 support will hold because the bearish price action looks poised to challenge this support.The daily chart shows that this bearish outlook could be limited even below 0.9320.

audusd daily chart 7/21

Here are some observations and outlooks from the daily chart:

1) The first thing you notice is that price is trading above the 200-, 100-, and 50-day simple moving averages.  These moving averages are also in bullish alignment with 200 on the bottom, 100 in the middle and 50 above them both.

2) The RSI in 2014 has tagged above 70 in April, and since held above 40. This shows maintenance of the bullish momentum.

With that in mind, if you see a break below 0.9320, expect some short-term bearish attempt, but be ready for buyers above the 0.92-0.9210 support established in May and June.

Meanwhile, given the bullish outlook in the daily chart, if price pushes above 0.94 this week, the bearish outlook in the 4H chart should be shelved, The 0.9440-50 area is common resistance and should be the next target. Above 0.9450, we should look for a bullish continuation scenario with the 0.9505 level and even further upside risk in play.

To contact the reporter of this story, email Fan Yang at fan@forexminute.com
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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.