Featured Trade: AUD/USD reversed down from pivotal resistance, potential fresh impulsive downleg ahead

The recent corrective rebound is likely to be over for AUD/USD

Short-term technical outlook on AUD/USD (Thurs 23 Aug)



Key elements

  • The recent rebound of close to 180 pips seen in the AUD/USD from its 0.7200 low of 15 Aug 2018 has stalled and reversed down from a significant short-term pivotal resistance zone of 0.7370/7390 with bearish elements.
  • The 0.7370/7390 resistance is defined by a confluence of elements; the upper boundary of a medium-term descending channel in place since Jan 2018 high, the pull-back resistance of the former minor range support from 02 Jul 2018 and a Fibonacci retracement/projection cluster (see daily & hourly charts).
  • The pair has just staged a bearish breakdown from two minor bearish reversal configurations; “Ascending Wedge” and “Head & Shoulders” with its former neckline support now turns into a pull-back resistance at 0.7340 (see hourly chart).
  • The on-going slide from yesterday, 22 Aug 2018 U.S. session high of 0.7370 seems overstretch with the pair now flirting just above the intermediate support of 0.7280 (former minor swing high areas of 14//17 Aug 2018 & 1.1618 Fibonacci projection of the on-going minor degree downleg phase from 22 Aug high of 0.7382 to 22 Aug low of 7330 projected from yesterday, U.S. session high of 0.7370) coupled with an extreme oversold reading seen in the hourly Stochastic oscillator. These observations suggest that the AUD/USD may stage a minor corrective rebound at this juncture to retest 0.7315/0.7320 intermediate resistance (former minor swing highs of 18/20 Aug 2018 & 38.2% Fibonacci retracement of the on-going slide from 22 Aug U.S. session high of 0.7370 to 0.7280).

Key Levels (1 to 3 days)

Intermediate resistance: 0.7315/7320

Pivot (key resistance): 0.7340

Supports: 0.7280 & 0.7210/0.7200

Next resistance: 0.7370/7390

Conclusion

The AUD/USD is likely to have resume its bearish impulsive downleg phase but given a minor “overstretched” condition on the downside, we cannot rule out a minor corrective rebound towards the intermediate resistance of 0.7315/7320 holding above 0.7280 to occur at this juncture. Thus, if the 0.7340 short-term pivotal resistance is not surpassed, the pair may see another down leg to retest the recent 15 Aug 2018 swing low area of 0.7210/7200 in the first step before targeting 0.7160/7140 support next (see daily chart).

However, a clearance above 0.7340 invalidates the bearish scenario for a squeeze up to retest the medium-term descending channel resistance at 0.7370/7390.

Charts are from eSignal



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