Forex Analysis:AUDUSD Might Be Preparing To Drop Towards 0.6530

Bottom line: AUDUSD long term structure continues to be bullish against 0.5505 lows in March 2020. In the short term though, bears might be inclined to push lower towards 0.6530 levels at least. Intermediary resistance is seen towards 0.7060 mark.

Fundamental Outlook:

Dow Jones futures managed to rally towards 26400 mark during early hours yesterday. This was quickly revered and the indices closed lower by -1.43% at 25864. SPX500 also followed suit, and managed to close -1.04% lower, at 3146. NASDAQ hit yet another high at 10700 before closing lower.

Indices in the US continue to diverge, and this could be a potential warning. Further with steady rise of COVID-19 in the United States, risk assets have also surprisingly rallied. These might be early signs of a potential risk aversion ahead. Investors should remain mindful.

AUDUSD had come under pressure after hitting highs at 0.6997 yesterday. The Reserve Bank of Australia kept interest rate unchanged at 0.25%. Low interest regime may stay for a while, it was hinted. On the other hand, state of Victoria plans a lock down as COVID-19 infections rise.

Technical Analysis:

AUDUSD might be preparing to drop lower towards 0.6530 level in the short term. After printing highs at 0.7060 earlier, bulls might be wanting to take a break as the currency produces a corrective drop. We expect the rally to resume from 0.6500 levels, going further.

AUDUSD has remained in control of bulls since 0.5505 lows, and managed to carve a series of higher highs and higher lows towards until hitting 0.7060 mark. Also note that a meaningful resistance was taken out around 0.7032.

AUDUSD is expected to ideally produce a corrective drop, before resuming its rally. The fibonacci 0.382 retracement is seen around 0.6530 and might produce a bullish bounce. Please note that probability remains for a continued drop through 0.6200 levels, the fibonacci 0.618 retracement of earlier rally.

Most traders might consider to remain flat for now, allowing AUDUSD to produce a corrective drop towards 0.6500 and 0.6200 mark. Aggressive traders might initiate short positions with risk above 0.7060 and potential target towards 0.6500 at least.

Prepared by

Harsh Japee, Technical Analyst.

 

AUDUSD Chart

 

 

 


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