Two vital points drive AUD/USD, 0.8260 and 0.7797. Three weeks ago, AUD drivers were 0.8264 and 0.7813. AUD/USD upper averages in 3 weeks dropped 4 pips from 0.8264 and 6 pips from 0.7813 and this explains the slow grind drop in AUD/USD over 3 weeks.
Yet overall AUD/USD’s major conundrum presently is it lacks a wide enough range to see the drastic moves and its challenged by oversold conditions as well as its relationship to break points.
AUD/USD from lower 0.7700’s on the daily front below 0.7752 is out of range and must travel to 0.7752 and above.
Longer term, AUD/USD is far off kilter to its 0.7836 range. Both vital AUD/USD drivers at 0.8260 and 0.7797 are highly oversold. Any prices lower in AUD/USD drives oversold to extreme prices.
Extreme prices means 0.7662, 0.7684 and 0.7707. AUD/USD in overnight Asia traded to its extreme at 0.7684 then bounced to current 0.7623. AUD to travel lower to extreme prices as well as an off range situation means AUD trades in a severe danger zone.
EUR/USD in many instances contains characteristics to travel in severe oversold or overbought market scenaruios while AUD is forced to move based on EUR/USD and its EUR/USD to throw AUD off kilter and most especially seen in current severe oversold AUD/EUR.
When last written in regards to AUD at 0.7800’s was stated a big move was on the way as AUD was forced to trade at either 0.7600’s or 0.8300;s as deep pressure was built into AUD’s price as the EUR/USD cause. AUD achieved 0.7600's.
As the upside for AUD was blocked by 0.7800’s and 0.7900’s as well as EUR to retreat lower, AUD lacked a choice except to move lower against severe oversold prices.
From the current daily perspective, a big AUD base is in formation. A base derives from not only oversold and off range but only 2 points exist to the downside and those points are located at 0.7682 and 0.7573.
Below 0.7573, AUD moves off the charts. No mystery in severe oversold at 0.7684 materializes as a break of 0.7682 means AUD dtops off 109 pips to 0.7573.
AUD/USD as well is challenged by a higher move as must breaks to travel higher are located at 0.7792, 0.7797, 0.7817 and 0.7859. Above 0.7859 then challenges the 5 year average at 0.8153 but also above 0.7859, AUD ranges would widen further and allow for a more comfortable trading range.
Overall AUD ranges in days ahead are located at 0.7792 and 0.7797 Vs 0.7682 and against a strategy to long on price drops especially at the extremes until better trade conditions materialize. AUD is severely caught between off kilter ranges, oversold and a wide range EUR/USD far from its significant break points.
Brian Twomey