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)

Conclusion

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


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