AUD/USD tumbled overnight, breaking below the support (now turned into resistance) barrier of 0.7045, which had been acting as the lower end of the sideways range the pair was trading within since the 3rd of October. Thus, having in mind the downside exit of that range, and also given that the pair continues to trade below the medium-term downtrend line drawn from the peak of the 16th of February, we would expect the rate to continue trading lower for a while yet.
The break below 0.7045 confirmed a forthcoming lower low on both the 4-hour and daily charts and may have opened the way for the psychological zone of 0.7000. If the bears are strong enough to overcome that round figure, then we may see the slide extending towards the 0.6970 hurdle, defined by the low of the 9th of February 2016. That said, bearing in mind the psychological status of the 0.7000 level, after it gets tested, we would stay careful of a return move back to the lower bound of the aforementioned range, before the next negative leg.
Looking at our short-term oscillators, we see that the RSI slid after hitting resistance near 50 and now hovers slightly above 30, while the MACD, already negative, has turned down as well and fell below its trigger line. Both indicators detect negative momentum and corroborate our view for AUD/USD to continue south for a while more, at least towards the 0.7000 zone.
On the upside, a break above 0.7055 could confirm the rate’s return within the range, something that would throw us to the sidelines. In order to start examining whether the bulls have gained the upper hand in the short run, we would like to see a clear move above 0.7165. Such a break may signal an upside escape from the range and could initially target the 0.7200 resistance. Another break above 0.7200 could pave the way for the 0.7240 barrier, which proved a good resistance zone on the 28th of September and the 2nd of October.
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