The Australian dollar daily chart displays the key consolidation that has been in place since the end of last summer. The longer-term bearish trend has tentatively respected the financial crisis lows (.6006 to .7000) that formed in 2008.
Over the past couple months, a special focus has fallen on the China slowdown and if we start to hear the Reserve Bank of Australia to become more dovish, we may see price attempt to test the .6500 region. Tonight the RBA is expected to keep policy steady but the Bank may signal potential easing action in the coming months. If they do, we could see any temporary rallies sold into.
The AUD/USD recent rebound from the middle of January is tentatively finding respect from both the 50- and 100-day SMA(s). If we see price rally towards the .7170 level, we could see the formation of a bearish Gartley pattern. Point D is targeted with both 70.7% Fibonacci retracement of the X to A leg and the 200.0% Fibonacci expansion level of the B to C move.
If this pattern is invalidated and we see price close the week above the noted SMA(s), the bullish advance may continue and target the psychological .7300 handle.
If bearish momentum persists, we could see price the bottom of the recent trading range.
The trade: Sell AUD/USD at .7170, with a stop loss at .7210 and take profit at 7050. The risk/reward ratio is 1:3