AUD/USD surged on Friday, breaking above the key resistance (now turned into support) zone of 0.7300, defined by the peaks of the 7th and 8th of November. However, it hit resistance fractionally below 0.7340 a few minutes before the closing, to open Monday with a negative gap. The pair continues to trade above the upside support line taken from the low of the 26th of October, and as long as this is the case, we would consider the near-term outlook to be cautiously positive.
We would expect the bulls to take charge again soon and aim for another test near the 0.7340 zone, the break of which may carry extensions toward the 0.7360 hurdle, near the highs of the 27th and 28th of August. That said, before that happens, we see a decent likelihood for the pair to continue correcting lower for a while more. A dip back below 0.7300 could confirm the case and may allow the bears to drive the battle towards the 0.7250 area, or the aforementioned upside support line. This is the area where the bulls may decide to jump back into the action and lift the rate higher.
Our short-term momentum studies support the notion for some further retreat. The RSI turned down after it found resistance slightly below its 70 line, while the MACD, although positive, has topped and appears ready to fall below its trigger line soon.
Having said all these though, we would like to see a clear and decisive break below 0.7235 before we start assessing whether the bulls have abandoned the battlefield, at least for the near term. Such a move could set the stage for the 0.7185 support, marked by the low of the 14th of November, the break of which could trigger extensions towards the low of the previous day, at around 0.7165.
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