Technical Analysis – AUDUSD rekindles positive sentiment; confronts heavy upside obstacle


Anthony Charalambous, XM Investment Research Desk

AUDUSD is encountering tough resistance at the 0.7192 mark after bouncing off the lower band of the cloud that merged with the 100-day simple moving average (SMA), around 0.7005. This fortified barrier coincides with the ceiling of the cloud and is encapsulated by the flattened Ichimoku lines. Nonetheless, the governing tone of the 50-and 100-day SMAs continues to aid the bullish structure.

The short-term oscillators also reflect the pickup in positive momentum. The climbing RSI has reached its neutral threshold, while the rising stochastic %K line has pierced into overbought territory, endorsing additional advances. The MACD, in the negative region, holds slightly below its red trigger line but looks set to return back above it.

To the upside, if buyers manage to jump above the cloud and the adjacent 50-day SMA, fused with the blue Kijun-sen line at 0.7211, the price may shoot for the 0.7344 high. Another leg up may revisit the near 25-month peak of 0.7413. Resuming the ascent, the price may meet the 0.7452 to 0.7483 area of highs from July and August 2018. Overcoming this too, the pair may target the 0.7623 barrier from June 2018 ahead of the 0.7676 high.

If sellers take control, initial support may come from the cloud’s lower boundary around 0.7100 before the 100-day SMA. Next, the neighbouring base from the 0.7005 low to the 0.6963 level, which is the 23.6% Fibonacci retracement of the up leg from 0.5506 to 0.7413, could challenge the drop. Diving deeper, the price may hit a strong limiting section from 0.6806 to 0.6749 which also encompasses the 200-day SMA. Sinking further, the price may then rest at the 38.2% Fibo of 0.6680.

In brief, AUDUSD commands a short-to-medium-term neutral-to-bullish bias above 0.7005. Triumphing above 0.7413 may boost this outlook, while a dip under 0.6963 may trigger negative tendencies.