audusd at key inflection zone for potential bearish reversal 1842502017

Technical outlook on AUD/USD

(Click to enlarge charts)

Key elements

• The recent uptrend from 02 January 2017 low of 0.7162 has been characterized by a steep ascending trendline which represents an unstable accelerating up movement that can be easily reverse by a negative shock (see 4 hour chart).
• The most recent up move from 19 January 2017 minor swing low of 0.7489 has evolved into a bearish “Ascending Wedge” configuration and this type of chart pattern usually forms at the end of a pronounced uptrend and its subsequent price action (bearish reversal) tends to be volatile (see 4 hour chart).
• The current up move from 19 January 207 minor swing low of 0.7489 has traced out a similar fractal configuration before a sharp price reversal to the downside as seen on 09 November 2016 and 14 December 2016
• The 4 hour RSI oscillator has traced out a bearish divergence signal at the overbought zone which indicates that the upside momentum of the recent up move has started to abate. This observation has happened in the past two occasions (Nov and Dec 2016) before a downside reversal in price action materialises (see 4 hour chart).

Key levels (1 to 3 weeks)

Intermediate resistance: 0.7610

Pivot (key resistance): 0.7650

Supports: 0.7545, 0.7450 & 0.7380/70

Next resistance: 0.7710/75 (see weekly chart)

Conclusion

As long as the 0.7650 key medium-term pivotal resistance is not surpassed and a break below the 0.7545 steep ascending trendline, the AUD/USD is likely to see a potential down move to target the supports at 0.7450 before 0.7380/70 next.

However, a clearance above 0.7650 may invalidate the bearish scenario for a further squeeze up towards the long-term resistance zone of 0.7710/75.

Charts are from eSignal

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