Bottom line: AUDUSD long term structure continues to remain bullish against 0.5505 lows in March 2020. The currency might have carved a meaningful top around 0.7250 levels over the last week and remains vulnerable for a drop towards 0.6275 levels, going forward.
Fundamental Outlook:
Dow Jones had peaked towards 28160 yesterday before reversing sharply. The indice had managed to close flat around 27760 levels. SPX500 and NASDAQ also closed in the red down -0.50% and -1.50% respectively. Indices might face further selloff as Mr Biden announces Kamala Harris as his Vice President pick.
AUDUSD has been under pressure after hitting highs around 0.7250 mark last week. The exchange rate might face further pressure, if risk assets continue their selloff. Global equity markets remain vulnerable to another round of bearish wave as demand for safe haven US Dollar might be back. Furthermore, Gold has dropped below the $1900 mark, which might be US Dollar bullish, as we prepare to publish.
Technical Analysis:
AUDUSD might have hit resistance around 0.7250 levels last week. The currency has reversed lower since then and is trading close to 0.7125 mark for now. A break below 0.7075 would be considered encouraging to bears as they prepare to regain control going forward.
AUDUSD seems to have formed a meaningful low at 0.5505 levels in March 2020. Since then, it has managed to produce an impulse wave, through 0.7250 levels. Ideally, an impulse wave should be followed by a corrective wave, to complete the structure.
AUDUSD might be preparing the proposed corrective wave since 0.7250 highs and could drop towards 0.6275 levels, over the next several weeks. Also note that 0.6275 is marked as the fibonacci 0.618 retracement of the above impulse rally. High probability remains for a bullish reversal there.
Most traders might be preparing to initiate fresh short positions around current price action (0.7125), with a protective stop above 0.7250 and projected targets around 0.6275 respectively. Only a break above 0.7250 would delay the bearish structure.
Prepared by
Harsh Japee, Technical Analyst.
AUDUSD Chart
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