audusd facing severe downside pressure but a minor rebound may occur first ahead of fed boj 18304120

AUD/USD – Technical Outlook

(Click to enlarge charts)

Key elements

• In the recent RBA monetary policy meeting held on 06 September 2016, RBA had left the key policy cash rate unchanged at 1.5% where the outcome was largely within market participants’’ expectations. Interestingly, it has staged a 120 pips rally to hit our predefined 0.7710 resistance and did a bearish reaction from it.
• The aforementioned 0.7710 resistance is considered as a crucial level as it is the former broken long-term ascending trendline support that is being extended from April 2001 major swing low now turns pull-back resistance that has capped prior sharp up moves twice since late April 2016 before the recent first RBA rate cut on 03 May 2016 (see weekly chart).
• The significant 0.7710 pull-back resistance also confluences with a Fibonacci cluster.
• In conjunction, the weekly (long-term) RSI oscillator is also being capped by a major descending trendline resistance since January 2004.  In addition, it has also breached below its most recent ascending trendline support which corresponds with the ascending trendline support that is still holding the current price action of the AUD/USD since the major swing low area of 15 January 2016. This observation from the weekly RSI gives us a bearish pre-signal which indicates that downside momentum of price action has resurfaced (see weekly chart).
• On the medium-term, the AUD/USD has staged a recent bearish breakout on 13 September 2016 from a multi-month “Toppish” formation in place since 15 July 2016 swing high (depicted in pink boxes) with exit potential at 0.7230. The pull-back resistance of this “Toppish” formation bearish breakout stands at 0.7570 (depicted in dotted purple).
• The aforementioned exit potential of the “Toppish” formation bearish breakout also confluences with a 0.7230/7145 support zone which is defined by the medium-term swing low area of 24 May 2016/former congestion zone seen from early February 2016.
• There is now a near-term support at 0.7410/7380 which is defined by the ascending trendline support in place since the medium-term swing low area of 15 January 2016 and a Fibonacci cluster.
• The daily (medium-term) Stochastic oscillator is now reaching an extreme oversold level which suggests that the recent decline triggered by the bearish breakout of the “Toppish” formation may see a minor rebound at the 0.7410/0.7390 intermediate support.

Key levels (1 to 3 weeks)

Intermediate resistance: 0.7570

Pivot (key resistance): 0.7710

Supports: 0.7410/7380 & 0.7230/7145

Next resistances: 0.7900 (long-term pivot)

Conclusion

The AUD/USD is now coming close to a critical juncture that will likely see the return of the long-term bearish down movement. However, technical elements suggest that the pair may see a minor “relief rally” first at the 0.7410/7380 intermediate support towards the intermediate resistance of 0.7570 before another potential pronounced downleg materialises. A break below the 0.7410/7380 support is likely to indicate that the corrective rally from January 2016 has ended and the AUD/USD shall resume its potential long-term down movement in place since its historical all-time high of 1.1080 printed on July 2011. Potential medium-term (1-3 weeks) downside target rests at the 0.7230/7145 support zone.

However, a clearance above the 0.7710 medium-term pivotal resistance may invalidate the preferred bearish scenario for a further squeeze up towards the long-term pivotal resistance of 0.7900.

Charts are from eSignal

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