Chart Of The Day - AUD/USD at risk of a minor corrective decline

Short-term technical outlook on AUD/USD

Key technical elements

  • The recent 8 weeks of rally from its 0.7500 low printed on 08 Dec 2017 has started to stall right below a major resistance of 0.8170 which is defined by the former long-term secular ascending trendline from Apr 2001 low now turns pull-back resistance and a Fibonacci projection cluster (see daily chart).
  • The daily RSI oscillator has exited from its overbought region after it hit an extreme overbought level of 80%. These observations suggest that the recent medium-term up move from 08 Dec 2017 is overstretched where the risk of a corrective mean reversion decline increases at this juncture.
  • As seen from the shorter-term chart (1 hour), the pair has staged a bearish breakdown from its former minor ascending trendline from 23 Jan 2018 (depicted in dotted pink) post FOMC where its previous rally has been capped by its key short-term resistance at 0.8113 (minor swing high areas of 29/30 Jan 2018 & the descending trendline from 27 Jan 2018).
  • The next significant short-term supports rest at 0.80000/7985 (minor swing low of 26 Jan 2018 + 23.6% Fibonacci retracement of the up move from 08 Dec 2017 low to 27 Jan 2018 high), 0.7940 (minor swing low areas of 16/18 Jan 2018) and 0.7890 (former medium-term swing high of 13 Oct 2017 that has been broken to the upside on 12 Jan 2018 & the 38.2% Fibonacci retracement of the up move from 08 Dec 2017 low to 27 Jan 2018 high).

Key levels (1 to 3 days)

Intermediate resistance: 0.8060

Pivot (key resistance): 0.8113

Supports: 0.8000/7985, 0.7940 & 0.7890

Next resistance: 0.8170 (major)


Therefore as long as the 0.8113 key short-term pivotal resistance is not surpassed and a break below 0.8030 (ascending channel support from 08 Dec 2017) is likely to reinforce the start of a potential minor corrective decline to target the near-term supports of 0.8000/7985 follow by 0.7940 and 0.7890 next in the first step.

On the other hand, a clearance above 0.8113 should invalidate the corrective decline scenario to see a squeeze up to test the 0.8170 major resistance.

Charts are from eSignal

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (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.