Last week, the USD got its groove back and the AUD/USD retreated from its bullish correction in April from 0.7533 to 0.8075. This rally did some damage to the prevailing downtrend, but we can’t count out the possibility of an expanded consolidation in the daily chart.
Note the higher highs and the lower lows. Also note that price is still holding mostly under the support area of a previous consolidation in late January and early February. Price is also still clearly under the 200-day SMA and is now even returning below the 100-day SMA. These are signs that bears are still in control of the market in the medium-term.
If the current price action holds above 0.78, there might still be further bullish correction into that Jan-Feb. consolidation area. On the other hand, a break below 0.77 would be a very convincing signal of bearish continuation.
The 4H chart shows that price has already cracked a rising trendline from mid-April, but again AUD/USD is still holding above 0.78. Note that the 4H RSI is still holding mostly above 40, showing that the prevailing bullish momentum is still in play.
Again, we can see that a break below 0.77 would clear a key support/resistance pivot area, and thus signal bearish continuation at least to test the 0.7533 low. In this scenario, make sure the RSI is able to break below 30, which would show revival of the bearish momentum.
In the 1H chart, we can see a tight range between 0.78 and 0.7850. A break above 0.7850 might initiate our bullish outlook, which first puts pressure on the 0.80 handle, then the 0.8075 high.
If price breaks above 0.7850, but stays below the 0.79-0.7925 resistance area as well as 100-hour SMA, then, we might still have downside risk.
A break below 0.78 and then respect of \he 0.7825 as resistance should also reflect more confidence to the bearish outlook.
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