AUD/USD traded higher on Monday, after it hit support at 0.7112 on Friday. However, the price structure remains lower highs and lower lows below the downtrend line taken from the high of November 2nd, and thus, we will consider the short-term picture to still be negative.
Even if the recovery continues for a while more, we see decent chances for the bears to jump back into the action from near the 0.7183 zone, or near the aforementioned downside line. If so, we could see another test near 0.7112 zoon, the break of which would confirm a forthcoming lower low and perhaps target the 0.7070 zone, marked by the inside swing high of October 30th. Another break, below 0.7070, could have larger bearish implications, perhaps setting the stage for declines towards the low of November 2nd, at 0.6990.
Shifting attention to our short-term oscillators, we see that the RSI rebounded and exited its below-30 zone, while the MACD, although negative, has bottomed as well and crossed above its trigger line. Both indicators detect slowing downside speed, which supports the notion for some further recovery before the next leg south.
On the upside, we would like to see a strong recovery above the 0.7290 territory before we start examining the bullish case. That zone provided strong resistance on November 18th and 19th, and thus, its break could make us more comfortable with regards to stronger advances. The rate would also be well above the downtrend line taken from the high of November 2nd, and thus, we would expect the bulls to climb towards the 0.7335 zone, or the 0.7370 barrier, marked by the high of November 15th. If they are not willing to stop there, then we may experience advances towards the 0.7430 zone, marked by the highs of November 8th and 9th.
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