audusd another potential new downleg looms 2692662017

Since our last analysis dated on 02 May 2017, the AUD/USD had reacted right at the predefined 0.7545/55 intermediate resistance after the outcome of the last Australian central bank, RBA monetary policy meeting. Thereafter, it staged a decline towards the 0.7400/7390 downside target/support (printed a low of 0.7325 on 09 May 2017). Click here for a recap on our previous report.

The recent rebound seen in AUD/USD is more subdued as compared to the EUR/USD due to on-going weakness seen in the commodities markets. AUD/USD tends to exhibit a direct correlation with the movement with commodities. Interestingly, as seen in the benchmark CRB Commodity Index, the recent rebound from the 176.66 has managed to test and staged a retreat right at the pull-back resistance zone of 182.85/184.65.  Technical elements are now advocating for a potential decline to at least retest the 176.66 level (refer to chart below).

Further potential weakness in the commodities markets is likely to add further downside pressure in the AUD/USD. Now, let’s us take a look at the latest technical elements on AUD/USD

Short-term technical outlook on AUD/USD

(Click to enlarge charts)

Key technical elements

• The recent rebound from the 09 May 2017 low of 0.7325 is likely to be corrective in nature within a medium-term bearish downtrend that is in play since 21 March 2017 high.
• The AUD/USD is still evolving within its bearish descending channel from 21 March 2017 high and the aforementioned rebound has led the pair to squeeze up towards the upper boundary of the descending channel now acting as a resistance at 0.7470.
• The key short-term resistance stands at 0.7470 which is defined by the descending channel resistance and the 61.8% Fibonacci retracement of the recent decline from 02 May 2017 high to the 0.7325 low.
• Current price action remains above a minor support at 0.7400 which is defined by an ascending trendline from 05 May swing low and the former minor range top congestion area of 10 May to 13 May 2017.
• The hourly RSI oscillator has staged a bearish breakdown from its corresponding trendline support and shows room for further potential downside before it reaches an extreme oversold leve1. These observation suggest a revival of downside momentum and a bearish pre-signal that indicates a potential breakdown below the 0.7400 minor support.
• The next significant short-term support rests at the 0.7280/60 region which is defined by a Fibonacci projection cluster and the lower boundary of the aforementioned descending channel.

Key levels (1 to 3 days)

Intermediate resistance: 0.7445

Pivot (key resistance): 0.7470

Supports: 0.7400 (downside trigger), 0.7330 & 0.7280/60

Next resistance: 0.7585

Conclusion

Therefore as long as the 0.7470 short-term pivotal resistance is not surpassed and a break below 0.7400, the AUD/USD is likely to shape another new downleg to retest the recent minor swing low area of 0.7330 before targeting 0.7280/60 next.

On the other hand, a clearance above 0.7470 is likely to invalidate the preferred bearish view to see the continuation of the corrective push up towards the next resistance at 0.7585 (the range top of 13 April/24 April 2017).

Charts are from eSignal

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