Forex Technical Update
AUD/USD 1H Chart 12/27/2012 8:35AM EST
Consolidation: The AUD/USD has been in a downtrend since topping around 1.0583 in mid-December. Even though it has been a short-term decline, it has been sharp and broke below some key trendlines, as you can see in the daily chart. However, this decline is stalling after Christmas, finding support twice at 1.0345. You can argue that it has formed a double bottom. However, for a true double bottom, you need a break above the 1.0385 resistance. Otherwise, it is simply a range-bound consolidation between 1.0345 and 1.0385 after a downtrend.
Momentum: We might even consider the consolidation scenario primary vs. the double bottom one because the bearish momentum is still bearish, as the 1H RSI remains under 60 after breaking below 30 many times. On the other hand, if the RSI is pushed above 60, we have a case for a double bottom and some short-term retracement.
Breakout scenarios: A break below 1.0345 should be a sign of bearish continuation. In the daily chart we see that the next support pivot is at about 1.0285, which might be the short-term target/level-to-monitor. The longer-term target coming from the breakdown of the rising channel in the daily chart, is the origin of the channel just above 1.0150. Before that, we might want to see a pullback fail to reach back into the channel, and stay below 1.04 before adding confidence to this bearish outlook.
A break above 1.0385 would be a pullback. At this point a rise above 1.04 does not kill the bearish outlook, though staying below it would help. Only a break back above 1.085 should suggest a return to the bullish mode.
AUD/USD Daily Chart 12/27/2012 8:40AM EST
Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
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