The Australian dollar has been one of the worst performing currencies over the last quarter, but a continuation of the slide may not occur as price was unable to make a fresh low below the .6900 level. If we see a further bounce higher, initial resistance may come from the .7275 level. It is around that area that we could see price tentatively form a double-top pattern. Bearish bets may want to wait and see we don’t see a major short-covering rally that may take the currency pair towards the .7400 and .7500 level.
If we do see price rally towards that area, we could see the formation of a bearish ABCD pattern. Point D would be targeted by either the 127.2% or 161.8% Fibonacci expansion levels of the B to C move. If valid, we could see a resumption of the downward move and ultimately weakness may target the .6750 level.
Tonight, the general consensus is expecting the RBA to remain on hold and if we do not see any dovish signals for future meetings, we could see the Australian dollar move significantly higher. If however, the Australian currency is heavily sold, .6937 will remain major support. A daily close below that level could open the door for fresh 2015 lows.
The trade: Buy AUDUSD at .7050, with a stop loss at .6950 and a take profit at .7350. The risk/reward ratio is 1:3
Edward J Moya
Chief Technical Strategist
World Wide Markets Online Trading