A Double Bottom Spotted in the AUD/USD

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A Double Bottom Spotted in the AUD/USD

A Shift in Trend:
The AUD/USD pair has been bearish since the 2014-high of 0.9505 made in early July. September saw the strongest part of the sell-off and price stabilized by the end of the month. Although price edged lower to a new low on the year at 0.8643 in October, we can see in the 4H chart that price action has been shifting from bearish to sideways.

AUD/USD 4H chart 10/13
audusd 4h chart 10/13

(click to enlarge)

Consolidation:
The current consolidation from the 0.8643 low involved a correction rally to almost 0.89. After a failed attempt to break below 0.8643, AUD/USD is starting this week with another correction rally that can build a price bottom along with last couple of week’s price action.

The 0.8825-30 area could be key. If price holds below this area and falls back below 0.8750, the previous rally to 0.89 would look like a clear-out, which suggests bearish continuation. In that scenario the 0.8643 low, and the 0.86 handle could be the next bearish targets in the short-term.

Double Bottom Attempt:
Otherwise, if price pushes above 0.8830, AUD/USD will be pressured towards 0.89, at which point there would be a double bottom. A completed double bottom with price above 0.89 opens up the
1) 0.8990-0.90 area, which contains the 200-period SMA in the 4H chart and a previous support/resistance pivot.
2) 0.91-0.9115 area, which contains another support/resistance pivot.

The most aggressive bullish outlook should be limited to the 0.9175-0.92 area, which involves the 61.8% retracement, the 200-day SMA, and a previous support area.

AUD/USD Daily Chart 10/13
audusd daily chart 10/13

(click to enlarge)

2014- Low:
When we look at the weekly chart, we can see that price is having a reaction around the previous 2014-low of 0.8660. Although we have a new low at 0.8643, this area is still seeing support, especially with the weekly RSI in the oversold area.

The weekly chart therefore also suggests a medium-term consolidation could be ahead. If this week’s price action does complete the price bottom, and at least hold above 0.88, the bullish correction scenario is likely in play.

AUD/USD Weekly Chart 10/13
audusd weekly chart 10/13

(click to enlarge)

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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.