Challenging a Bearish Trend: The AUD/USD is rallying today despite resilient USD strength seen in most USD-crosses. The 4H chart shows a market that has recently shifted bearish. The 200-, 100-, and 50-period simple moving averages (SMAs) have been all clustered together, but started spreading in bearish alignment in late July through August so far. Price has been trading below them, and treated them as resistance on August 5. Meanwhile, the 4H RSI has dipped below 30, then held below 60, which reflects maintenance of bearish momentum. However, today’s rally is threatening these bearish developments.
As AUD/USD rallies toward 0.9320, it is challenging the falling trendline from July 23rd high of 0.9474. The 4H RSI is also attempting to push above 60, which would reflect loss of bearish momentum. In fact, if the market is still bearish, this is probably a good place for sellers to fade the rally, so be aware of this scenario first.
Bearish scenario: If traders hold AUDUSD below 0.9320, there is still downside risk first toward the August low of 0.9240, then toward a key support in the 0.92-0.9210 area.
Bullish scenario: A break above 0.9320, followed by a pullback that holds above 0.93, would be a signal for the bullish outlook, at least toward the 0.9450-0.9474 area (highs from July 23).
(click to enlarge)
Bullish Bias: On the daily chart, you can see that there is still a bullish bias. Despite the bearish action since 0.9505, AUD/USD is still holding above the 200-day SMA, and the key support around 0.92. Also the daily RSI has held above 40, which shows maintenance of the prevailing bullish momentum, albeit weak bullish momentum.
Bullish Continuation: Still, a break above the falling trendline seen in the 4H and the daily charts, could signal bullish continuation, which exposes the 0.9505 with possible upside above that for fresh highs on the year.
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