Technical Analysis – AUDUSD rebound loses steam after hitting wall at 0.62

Raffi Boyadjian, XM Investment Research Desk

AUDUSD has recovered by more than 11% after plunging to a 17-year low of 0.5506 on March 19 but the rally is at risk of faltering after prices failed to get past the 0.62 level.

The momentum indicators are sending mixed signals as the rising MACD above its red signal line reinforces the improving near-term sentiment for AUDUSD, but the stochastic oscillator suggests a possible downside correction. The %K line has crossed below the %D line in overbought territory, so the weakness in price action is likely to continue in the very short term.

If the pair manages to hold above immediate support at 0.6089, which corresponds with the 20-day moving average (MA) and is the 38.2% Fibonacci retracement level of the down move from 0.7031 to 0.5506, the bulls may take charge again and push it higher. But the barrier at the 0.62 handle would first have to be overcome to extend the rally.

A break above 0.62 could see AUDUSD next stumbling at the 50% Fibonacci of 0.6269. But clearing this hurdle and then also able to surpass key resistance around the 50-day MA where the 61.8% Fibonacci of 0.6449 also lies, the uptrend should become more sustainable, which would then help change the bearish medium-term picture to a more neutral one.

However, if prices slip below the 20-day MA, the short-term bias would switch back to negative and the 23.6% Fibonacci at 0.5866 would come into range. Dropping below the 23.6% Fibonacci would reinvigorate the bears and increase the prospect of AUDUSD diving to fresh 17-year lows below 0.5506.