Bottom line: AUDUSD bulls must hold above 0.6668 support to keep the bullish structure intact. A break above 0.6780 would be encouraging for bulls.
Technical Analysis:
AUDUSD has found interim support just ahead of 0.6668 and has produced a Morning Star candlestick pattern on the daily chart. This could be a potential reversal and prices breaking above immediate resistance at 0.6780 further confirms. If the Aussie Dollar drop is incomplete, a bearish reversal could be seen around 0.6775/80 levels going forward. At the moment the overall structure remains constructive for bulls to continue higher. The rally between 0.6668 and 0.6930 was Wave (1), subsequently followed by a complex corrective structure A-B-C, Wave (2) that terminated at 0.6675. Ideally Wave (2) should not drop below the beginning of Wave (1) to keep the bullish structure intact. If the above counts are correct, AUDUSD would remain above 0.6668 and continue pushing higher as Wave (3) rally unfolds. A break above 0.6800/50 would certainly confirm a bullish reversal. Traders’ patience has been tested here and they might want to consider holding long positions with a protective stop below 0.6668. The rally since 0.6675 lows seems to be still corrective and a 5 wave move would be required to confirm a potential reversal ahead. The Aussie Dollar has found channel support around 0.6780 levels as well, which is supporting the bounce. It still remains vulnerable for a bearish reversal from 0.6780 levels, which is the fibonacci 0.382 retracement of the drop between 0.6933 and 0.6775 respectively. A break above the channel resistance at 0.6800 would confirm that bulls are here to stay. Conservative traders might want to remain flat for now, and allow a 5 wave rally to confirm that the trend has reversed. They might be willing to buy on dips thereafter.
Prepared by
Harsh Japee, Technical Analyst.
AUDUSD Chart
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