AUD/USD rebound loses momentum

<p>AUD/USD (daily chart shown below) bulls had two good weeks of a relief rally as the punishing long-term downtrend finally relented and the currency pair […]</p>

AUD/USD (daily chart shown below) bulls had two good weeks of a relief rally as the punishing long-term downtrend finally relented and the currency pair rebounded off its new six-year low of 0.6903 that was just established in early September.

That rise culminated in a spike late last week that attempted, but has thus far failed, to overcome major 0.7200 resistance during and shortly after the Fed’s announcement that it was keeping US interest rates unchanged. On both Thursday and Friday of last week, the AUD/USD daily chart printed candlesticks with long upper wicks (or shadows) that implied an attempt and failure to follow-through to the upside.

AUD/USD Daily Chart

 

To begin the new trading week, Monday saw the currency pair retreat substantially further below resistance as the US dollar regained momentum and AUD/USD began to reassert its longstanding bearish trend.

Currently situated just slightly above the noted 0.7200 resistance is the key 50-day moving average, which has served as a major resistance factor for the downtrend since June.

Adding further to Monday’s pullback for the commodity-linked Australian dollar has been a corresponding pullback in gold after the precious metal rallied sharply during the latter half of last week.

With continued expectations of a near-term US rate hike despite the Fed’s non-action in September, the US dollar should continue to be supported, which could likely place sustained pressure on AUD/USD.

If the currency pair continues to be rebuffed by the noted 0.7200 resistance level, the immediate downside target is at the 0.7000 psychological support level. Any further follow-through that extends the entrenched downtrend should then target the next major downside objective at the 0.6800 support level.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.