Since the beginning of April, AUD/USD has been trading sideways. For now, this can be assessed as a consolidation after a new high on the year at 0.9460.
However, the recent downswing within this consolidation is starting to threaten a more bearish correction.
This week, the AUD/USD fell below a rising channel support. During the 5/21 session, traders tested the 0.92-0.9215 support area.
Dovish FOMC meeting minutes softened the greenback, and AUD/USD bounced off the support. As we get into the 5/22 session, the pair extended above 0.9250.
The 4H stochastic and RSI are turning up, suggesting a reversal from a bearish cycle to a bullish one. Since the market is not bearish yet, and is neutral to bullish, we can expect at least a short-term bullish attempt in this upcoming session.
Let’s see what happens when the 4H RSI gets back to 60, and when price comes back toward the 0.93-0.9315 support/pivot area, where price is likely to also test the cluster of moving averages (200,100,50). If the market pushes back above the moving averages and the 4H RSI pushes above 60, it is likely that the market is still bullish-neutral.
The daily chart shows a market that has turned bullish in 2014. The current consolidation is a significant one, and if the bullish push this session fizzles, there is downside risk toward 0.9135-0.9155, which contains the 38.2% retracement, and the 200-day and 100-day moving averages, as well as a previous resistance pivot.
Below 0.9135, the 0.9060 represent the 505% retracement, and the 0.8965 level represent 61.8% retracement. For now, let’s limit any bearish outlook to the 61.8% retracement.
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