chart of the day audusd at inflection level for short term potential downleg 1855962017

In our previous article, “AUD/USD – Risk of short-term mean eversion decline as RBA looms” dated on 30 June 2017, the AUD/USD had shaped the expected bearish reaction right below the 0.7710/7750 significant long-term range support and declined towards our short-term downside target/support at 0.7622/7610.  Click here for a recap.

After it printed a low of 0.7570 on 07 July 2017 (pre-U.S. nonfarm payrolls/NFP) during the Asian session, it had started to trade sideways since post NFP and printed a current intraday high of 0.7620 in today’s Asian session (11 July 2017).

Interestingly, the post NFP’s price action of the AUD/USD has started to trace out an interesting technical configuration as per highlighted in greater details below.

Short-term technical outlook on AUD/USD

(Click to enlarge chart)

Key technical elements

• The recent minor ascending sideways range configuration in place since the 05 July 2017 minor swing low of 0.7568 has managed to stall right at the upper boundary of the short-term descending channel in place since 30 June 2017 high now acting as a resistance at 0.7625.
• The aforementioned short-term descending channel resistance of 0.7625 also confluences with the minor swing high areas of 05 July/ 07 July 2017 (right after the release of the NFP data) and the 38.2% Fibonacci retracement of the recent decline from 30 June 2017 high to 05 July 2017 low.
• The hourly Stochastic oscillator has hit an extreme overbought level coupled with a bearish divergence signal. These observations indicate that the risk of a bearish reversal in price action as upside momentum of the recent push up seen from yesterday (10 July) intraday low of 0.7586 has started to ease.
• The recent consolidation in price action from 05 July 2017 low of 0.7568 has formed a bearish continuation configuration/pattern called “bearish flag”.
• Coupled with the Elliot Wave Principal/fractal analysis, the aforementioned “bearish flag” is likely to have completed its minute degree upleg, labelled as wave e on the hourly chart that indicates a potential completion of the “bearish flag”/ascending range configuration at 0.7620/7625. Therefore, the AUD/USD may now kick-start another potential minor degree bearish impulsive downleg.
• The next significant support rests at 0.7540/35 which is defined by the minor swing low area of 22 June 2017 and the 50% Fibonacci retracement of the rally from 02 June 2017 low to 30 June 2017 high.

Key levels (1 to 3 days)

Pivot (key resistance): 0.7625

Supports: 0.7570, 0.7540/35 & 0.7517/7500

Next resistance: 0.7670

Conclusion

Therefore as long as the 0.7625 pivotal resistance is not surpassed, the AUD/USD is likely to shape another potential downleg to retest 0.7570 before targeting the next support at 0.7540/35.

However, a clearance above 0.7625 should invalidate the preferred bearish scenario to see an extension of the on-going minor corrective up move towards the next resistance at 0.7670 (the pull-back resistance of the former ascending channel support from 02 June 2017 low & close to the 61.8% Fibonacci retracement of the recent decline from 30 June 2017 high to 05 July 2017 low).

Chart is from eSignal

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