AUD/USD Signals Bullish Continuation by Breaking a Trendline

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AUD/USD Signals Bullish Continuation by Breaking a Trendline

The AUD/USD was bearing since mid, late-July, when price fell from 0.9474 down to 0.9239 last week. Since then, traders have bid up the Aussie-US Dollar pair. The 2 main signals that the market is shifting away from the bearish outlook are:
1) A break above the falling trendline that connects the 0.9474 high with the 0.9374 resistance pivot.
2) The RSI popping above 60, which shows loss of bearish momentum.

AUD/USD 4H chart 8/14
audusd 8/14

(click to enlarge)

Pending Bullish Signals: A break above 0.9360 would clear the 200-, 100-, and 50-period simple moving averages (SMAs) in the 4H chart, which would move the pair further away from the bearish outlook.  A Break above 0.9375 would break the lower highs and lower low pattern and thus introduce a bullish outlook. Also, if the RSI can tag 70, and then hold above 40 on its way down, then we will have development of bullish momentum.

Let’s take a look at the daily chart:

AUD/USD Daily Chart 8/14
audusd daily chart 8/14

(click to enlarge)

Bullish Bias, Bullish Continuation Scenario: When you look at the daily chart, you should see more bullish bias, and expect a bullish continuation scenario. Note that 2014 price action in general has been bullish, though it has turned choppy and sideways since April. Still, with price above 0.92, AUD/USD is neutral-bullish .Today’s price action is putting focus on the bullish component.

Note that the daily RSI is still holding above 40, which keeps a bullish momentum bias.

Bullish Continuation: I noted the implication of a break above 0.9360 and 0.9375 . When you look at the daily chart, a break above 0.9375 would also put price above the 200-, 100-, and 50-daily SMAs, which also revives a bullish outlook. With the 2014 trend already bullish, this could be a bullish continuation scenario, first with upside risk at least back towards the 0.9474, and 0.9505 highs.

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.