Featured Trade: AUD/USD evolving within a bearish configuration

AUD/USD may see a bearish breakdown.

Short-term technical outlook on AUD/USD (Tues 19 Feb)



click to enlarge charts

Key elements

  • Since its 03 Jan 2019 flash crash low of 0.6738, the AUD/USD has not made any significant up movement progress even though pair has continued to trade above the pull-back support of former primary descending channel resistance from 26 Jan 2018 high that has been broken out on 05 Nov 2018. The recent flash crash low of 0.6738 has managed to find support at the pull-back support of the former primary descending channel resistance (see 4-hour chart).
  • Since the bullish breakout from the descending channel resistance on 05 Nov 2018, the price action of AUD/USD has traded sideways and its technical conditions have started to deteriorate. The recent swing high of 0.7295 printed on 31 Jan 2019 has stalled at a descending trendline resistance from 03 Dec 2018 high and made a failure bullish breakout above the previous swing high areas of 11/15 Jan 2019 as it reintegrated below 0.7200.
  • The recent rebound from its 0.7055 minor swing low of 12 Feb 2019 has started to form a potential minor bearish reversal “Head & Shoulders” configuration with a bearish divergence signal seen in the 4-hour Stochastic oscillator at its extreme overbought level of 96 (see 4-hour chart).
  • The exit target of the ‘Head & Shoulders” stands at 0.6825 which is also defined by the 1.382 Fibonacci expansion of the recent push down from 31 Jan 2019 high of 0.7295 to 12 Feb 2019 low of 0.7055 projected from yesterday, 18 Feb high of 0.7160 and the pull-back support of the former primary descending channel resistance from 26 Jam 2018 high (see 4-hour chart)
  • The key short-term resistance stands at 0.7160/7170 which is defined by the descending trendline from 31 Jan 2019 high, the minor ascending range resistance from 12 Feb 2019 low and a Fibonacci retracement/expansion cluster.

Key Levels (1 to 3 days)

Intermediate resistance: 0.7145

Pivot (key resistance): 0.7160/7170

Supports: 0.7105, 0.7060/7040 & 0.6920

Next resistance: 0.7200

Conclusion

If the 0.7160/7170 key short-term pivotal resistance is not surpassed, the AUD/USD is likely to see a further potential push down to test 0.7105 (minor ascending range support from 12 Feb 2019 low) follow by the 0.7060/40 neckline support of minor “Head & Shoulders” configuration in form since 11 Jan 2019. A break below 0.7040 shall trigger the bearish breakdown to target the 03 Jan 2019 flash crash swing low area (exclude the spiked down) of 0.6920 in the first step.

On the other hand, a break above 0.7170 negates the bearish tone for a push up to retest 0.7200 (also the 61.8% Fibonacci retracement of the recent slide from 31 Jan 2019 high to 12 Feb 2019 low).

Charts are from eSignal




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