AUD/USD surged yesterday after the Fed disappointed those expecting the new dots to signal a 4th rate hike this year. The rally came after the pair found support near the 0.7680 level and the lower bound of a downside channel that’s been containing the price action since the 9th of February. However, the rebound was limited near the 0.7775 resistance and then the rate retreated to test the 0.7725 area as a support this time.
Bearing in mind that AUD/USD continues to trade within the aforementioned channel, we believe that the near-term outlook remains negative. If sellers manage to push the rate back below the 0.7725 support, then we may see them aiming for another test near the 0.7680 zone, or the lower end of the downside channel.
Our short-term momentum studies support somewhat the notion. The RSI turned down and fell back below its 50 line, while the MACD, although above its trigger line, lies within its negative territory and shows signs that it could start topping.
On the other hand, a move above 0.7775 could confirm that there is scope for more recovery and could initially target our next resistance of 0.7805. Another break above that level could pave the way for the 0.7845 hurdle. That said, even in the case of another upside wave, as long as the pair remains within the channel, we would treat such a recovery as a corrective move.
We would like to see a clear close above the channel’s upper bound before we start examining whether the picture has turned positive.
