The bears have taken control of the AUD/USD pair after it hit the critical resistance level at 0.81044. Prior to the recent drop, the pair formed a nice bearish engulfing pattern right at the bearish trend line resistance. In the last trading week, the bears managed to break the 200 weekly support level at 0.77798. Currently, the pair is slowly heading towards the long-term bullish trend line support at 0.7600 marks. This level is very crucial for the optimistic buyers as we have 100 SMA just above the trend line support. Any bullish price action confirmation signal right at the trend line support level will be an excellent opportunity to execute long orders.
AUD/USD weekly chart analysis
From the above figure, you can clearly see that the price has plenty of room to move downwards. If the 100 weekly SMA manages to cap the recent downward movement, the pair will head towards the 200 weekly resistance level at 0.77731. A daily closing of the price above the critical resistance level at 0.77731 will confirm to completion of recent fall. Most of the retail traders in the CFD trading industry are cautiously waiting on the sideline to get a bullish reversal signal.
In the daily chart, the pair has just breached the 100 and 200 day SMA which definitely indicates strong bearish momentum. Moreover, sellers have taken out the critical support level at 0.77479 which is also the 61.8% Fibonacci retracement level, drawn from the low of 8th December 2017 to the high of 26th January 2018. If the bulls manage to take control of the market from the critical support level at 0.76041, we will see a strong bullish rally towards the bearish trend line at 0.81111. From that level, the sellers will try to take control of the market but a daily closing of the price above that resistance level will ultimately lead this pair towards the next major resistance level at 0.82936. This level is very crucial for the long-term investors since a clear break of this level will suggest the initial bottom formation of this pair at 0.74959.
Fundamental Factors
We have plenty of high impact news scheduled for this trading week. If RBA governor comes up with a hawkish statement in the RBA Monetary Policy Meeting Minutes we will see a strong recovery attempt from the Aussie bulls. On the contrary, a dovish statement will put the Aussie dollar lower in the global market. On Thursday we have FOMC statement which is most likely to create a high level of market volatility in this pair. Though FED officials have stated that they are looking for four rate hike for the year 2018, the leading economist believes the current performance of the US economy is not up to the market for such aggressive rate hike program. However, a significant improvement in the US labor field and trade balance will help the US dollar index to recover its loss.
An imminent rate hike will definitely boost the optimistic dollar bulls in the global market but a dovish rate hike will create an extreme level of uncertainty in the global market. Followed by this we have Unemployment Rate data release for the Aussie economy. This data will help the long-term investors to identify the current strength of the market trend.
Considering the technical and fundamental parameters the overall bias for the AUD/USD pair is slightly bullish. However, we have plenty of room in the downside which argues against going long. So it’s better to wait on the sideline and look for bullish price action signal at the weekly trend line support.