After forming that false break reversal pattern above the 0.8060/5 level earlier this month, the AUD/USD has broken several key support levels on the way down. But the key question remains: has the long-term bullish trend ended? Well, not really. After all, price is still comfortably above the still-rising 200-day moving average at 0.7645. The slope and direction of this long-term moving average objectively tells us that the trend is bullish. But if the bullish trend hasn’t ended then we need to see the resumption of the rally soon, otherwise there is a risk we may see a deeper correction in the short term. Specifically, the buyers need to hold their ground around 0.7800/30, an area which was formerly resistance prior to that big breakout in July. This level was already re-tested in mid-August, when priced formed a low of 0.7810 before ripping to a new yearly high. This morning, price dropped to probe liquidity below this level, but only for a brief moment. The fact that the Aussie didn’t want to stay below 0.7810 makes me wonder whether we have now seen the low for this month. To confirm that the buyers are back, we now need to see a strong rally from here and the breakdown of some key resistance levels, including the 0.7910-0.7945 area in the coming days. However, if price fails to move away from this level quickly then this would suggest that the sellers are not done yet. In this potential scenario one could reasonably expect to see a breakdown towards the next support at 0.7710. This level comes in ahead of the 200-day average and also the next support level at around 0.7625. It is worth pointing out that we will have China’s manufacturing PMI over the weekend, followed by the Reserve Bank of Australia’s rate decision on Tuesday and then the US monthly jobs report on Friday. Any one of these fundamental events has the potential to move the Aussie dollar sharply in one or the other direction.
Source: eSignal and FOREX.com.