Bottom line: AUDUSD long term structure continues to remain bullish against 0.5505 lows since March 2020. The currency might have carved a meaningful top around 0.7400 handle as bears prepare to be back in control in the near term.

 Fundamental Outlook:

Dow Jones has found bids from 27100/200 lows since September 09, 2020. The indice trades above 28000 for now and might face renewed selling pressure around 28500 levels. Further with FOMC today around 02:00 PM EST, it would be interesting to see how indices react to Fed’s economic projections. Interest rates are expected to remain unchanged at 0.25%.

AUDUSD has managed to recover from 0.7200 lows from last week. The exchange rate is trading around 0.7320 mark over strong economic data coming out of China, as we prepare to publish. The US Dollar might be taking its cues from FOMC today and it might continue to gain if risk aversion returns. The risk associated AUDUSD might remain under pressure in that case.

Bitcoin trades around 10900 levels for now and might remain under pressure as the safe haven US Dollar is set to gain over the next few weeks. The crypto currency might find buyers if it reaches around the 7000-8000 mark, going further.

Technical Analysis:

AUDUSD might have carved a meaningful top around 0.7413 mark early this month. The currency had dropped over 200 pips through 0.7200 levels before pulling back higher again. It has managed to hit through 0.7330/40 levels yesterday as bears might prepare to resume lower.

AUDUSD had been in control of bulls since printing lows around 0.5505 levels in March 2020. The currency has produced a religious uptrend, carving a series of higher highs and higher lows through 0.7413 levels. Also note that the entire rally seems to be an impulse wave.

Ideally, the impulse rally should be followed by a meaningful corrective drop. AUDUSD might have just resumed lower towards 0.6750 and 0.6330 levels respectively. Also note that 0.6330 is fibonacci 0.618 retracement of the above rally hence probability remains high for a bullish bounce there.

Most traders might be preparing to initiate fresh short positions around current price action (0.7320/30), with a protective stop above 0.7413 and projected targets towards 0.6750 and further. Only a consistent break above 0.7413 would change the near term bearish structure.

Prepared by

Harsh Japee, Technical Analyst.

AUDUSD Chart

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