I have suspected the weekly charts are amid a topping pattern but the daily timeframe has provided few clues to back this up. However recent price action suggests this is quickly changing.
Home building approvals disappointed again, for the 4th out of five months, adding further doubt on the housing sector, whilst import and export prices have also declined. With import and export prices also declining this should have a negative impact on pending GDP Q2, whilst painting a slightly more bearish picture for the Australian Dollar.
Prior to the release the AUD was nursing wounds following US GDP rising to 4% which saw it crash through key 0.932 support during the session to test 0.930, a key support for the bulls to defend.
The markets focus will noel be on China PMI and US employment data, with poor numbers required to help it remain above 93c. If however we see China PMI revised down and decent employment data, this could push the fragile AUD down through 93c, which would then target 92c over the coming weeks.
Already we are seeing profit taking around 0.932 which may help support the AUD leading up to the next major event. However we have clear resistance levels at 0.93685 which could entice bearish swing traders to come out of hibernation.
Looking ahead I have decided to resurrect the bearish outlook. WHilst I continue to suepct we are amid a topping pattern on the weekly charts, keep in mind that tops can take time to develop. A break below 0.92 would be my confirmation with targets being 0.90, 0.87 and 0.85. I have highlited the previous 2 cycle tops and timing wise the cycle appears sound. This would also tie in with my bias for the USD having seen a 6.4yr cycle low.
I have also included a 50-week DPO (Detrended price oscillator) which measures the distance between closing price and 50-week MA. We can see that we are also trading in an area which is prone to 'snap back' to its 50-week MA. (Just something to keep in mind...).