AUD/USD sees downside momentum
AUD continued its downside price losses last week selling off and breaking below its long term rising trendline established off its May low at 0.7013.This development has pushed this pair clearly below its major emas which is a bearish sign.
Figure 1: Daily Chart
In late Marâ€™06, AUD bottomed out at 0.7013 low coinciding with its weekly 200 ema and its psychological support level at 0.7000.It took off from these levels and embarked on a six-week run to the upside hitting resistance at 0.7796 in Mayâ€™06 before a sharp decline followed halting at 0.7311,.618 Ret of its March-May rally. Another rally ensued terminating at 0.7713 after an unsuccessful attempt at retesting its Mayâ€™06 high. Subsequent attempts at this level also failed culminating in a sell off leading to a break below its seven months rising trendline last week.
Figure 2: Weekly Chart
Now that this pair has pushed below its major emas and broken through its important rising trendline, how far can it go? A look at the charts show that the prices are heading lower and are well supported by the momentum indicators which are bearish suggesting that more downside price losses are likely. Further downside price losses now targets 0.7403, its July 19â€™06 low which converges with its .50 Ret at 0.7404(Marchâ€™06-Juneâ€™06 rally).On a break of this level, an important support level comes in at 0.7268, its Juneâ€™06 low ahead of its year-to-date low at 0.7013.Conversely,on any retracement/correction, the broken rising trendline should now reverse roles as resistance and push the pair lower.
On the whole, with AUD below its major emas and its broken rising trendline combined with its daily and weekly momentum which are pushing to the downside, a likely lower level prices are expected in the days and weeks ahead.
is a private trader and an independent technical analyst. He initially traded stocks and now primarily focuses on forex. He produces Weekly, Mid-Week and Friday forex technical research which is available at www.tradingmarkets.com/fxtechnicalresearch.
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