AUD/USD has been trading in a recovery mode since Aug. 20, as marked by the upside support line drawn form the low of that day. However, on Friday, the pair hit the downside resistance line drawn from the high of May 10, and then, it pulled back. Given that it stayed below that line, but also that it is still trading above the upside line taken from the low of August 20th, we will hold a flat stance for now.
In order to start examining whether the prevailing downtrend has resumed, we would like to see a dip below 0.7380, a barrier that provided decent resistance on Aug. 11 and 13. This will confirm the dip below the upside line and may initially aim for the 0.7340 level, marked by the inside swing high of Aug. 31. If that level doesn’t hold, we could see declines towards the 0.7285 territory, defined as a support by the lows of Aug. 30 and 31, the break of which could extend the slide towards the 0.7235 territory, marked by the lows of Aug. 25 and 26.
Taking a look at our short-term oscillators, we see that the RSI turned down and exited its above-70 zone, while the MACD, although positive, has topped and fallen below its trigger line. Both indicators suggest that the upside momentum has started to slow down and that some more declines may be in the works for now.
However, as we already said, it is better to wait for a confirmation break below the upside line drawn from the low of Aug. 20, before we start examining the bearish case.
On the upside, a break above 0.7535, the high of July 7, may confirm the break above the downside line taken from the high of May 10. The bulls may then get encouraged to push the action towards the high of July 6, at 0.7597, the break of which could see scope for extensions towards the 0.7645 obstacle, marked by the high of June 17 and the inside swing low of June 3.