AUD Technical Analysis

The Australian Dollar tracked lower after a retest of support-turned-resistance at the bottom of a bearish Descending Triangle chart pattern, as expected. Prices attempted to recover after breaking counter-trend support and even managed to set a higher swing top, but the effort fizzled. A bearish Evening Star coupled with negative RSI divergence now reinforces the case for a reversal.



From here, the next significant layer of support seems to be in the 0.6827-65 area, marked by recent attempts to challenge trend-defining support at the January 2016 low. Securing a break below that on a daily closing basis probably opens the door for a challenge of the 2019 spike low at 0.6744. The outermost layer of downward-sloping trend resistance is now at 0.7088.

Zooming out to the weekly chart, overall technical positioning continues to suggest the AUDUSD downtrend started in early 2018 has resumed following a period of congestion. While the support at 0.6827 is yet to be broken, measuring the width of the Descending Triangle pattern defining the digestive period prior to breakdown implies a steeper decline to test the 0.67 figure.

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Before looking at the undercurrent of the market, first we should appreciate the surface level technical churn that is drawing so much attention for the Australian Dollar. A daily chart of AUDUSD (below) shows the significant confluence of technical measures that we have recently seen come under significant stress – with some of the favorite quantitative elements of the pattern actually breaking. There are a few key technical structures on this chart that would individually carry significant connotation by themselves.

However, in the hierarchy, the inverse head-and-shoulders pattern arguably holds more weight. The ‘neckline’ break just below 0.7050 fits a textbook assumption that a line has been crossed that can sometimes cue one of the market’s favorite scenarios: an early reversal with momentum potential. That said, if we reduce the attention on the H&S pattern, the trendline that shaped 13-months of bear trend was only temporarily surpassed with a close bac below the barrier on Friday. Furthermore, the 200-day moving average at 0.7090 as of Friday never fell. These are good additional milestones to add to conviction, but it can be argued that they are still standing.

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It’s been a rough year so for AUD/USD and it didn’t start out very well, either. We can even extend that back to the beginning of 2018, as there hasn’t really been much for Aussie bulls to rejoice since the start of last year.

After topping-out above the .8100 level in January of 2018, the pair dropped by more than 1,000 pips over the next nine months. A bit of support early in Q4 helped to stem the declines but, sellers were again ready to pounce after the 2019 open, aggressively enough that a flash crash showed in AUD/USD as prices tipped-down to .6750 to find a bit of support. That price, as it turns out, would continue to carry a pull in Australian Dollar price action to go along with a bit of historical intrigue.

Sellers weren’t yet finished after the January flash crash and following a mild bounce, bears came back to drive the pair-lower over the next seven months, bringing us to today… That same .6750 level has helped to hold the lows over the past three weeks and sellers have not yet been able to leave it behind despite an aggressive test-below last week.

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AUDUSD is rising hard off the recent low, stringing together multiple positive days. It’s the strongest bounce since June, but like the first month of summer the initial push higher may prove to be short-lived. The key will be how momentum continues in the days ahead.

There is an immediate threat to the rally via the June low, and to a lesser degree the May low. A reversal in the vicinity of 6840/75 could present traders with an opportunity to short for a drop back towards the recent lows under 6700. Stops set above any swing-high that develops once a turn down begins.


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The Australian Dollar has risen sharply from its coronavirus-inspired March lows, but like all other growth correlated assets must now likely face some grim economic data.

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The Australian Dollar may come under increasing downside pressure as local coronavirus cases spike and tensions with China escalate.

From a technical standpoint AUD remains capped by the 2012 downtrend, which has consistently acted as a pivotal inflection point for the cycle-sensitive Australian Dollar. To that end, deteriorating fundamentals may impose increasing downward pressure on AUD against its major counterparts, and may signal the end to the commodity-linked currency’s surge to pre-crisis levels.

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The value of owner-occupied home loans in Australia climbed a seasonally adjusted 10.7 percent on month in July, the Australian Bureau of Statistics said on Wednesday - coming in at A$14.33 billion.

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The future implications of the US election may influence AUD/USD following the RBA and Fed rate decisions as Congress struggles to pass another round of fiscal stimulus.

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AUD/USD is on daily bullish ranging near the bearish reversal.

• The key resistance levels are 0.733 for the bullish trend to be continuing with 0.741 as a target.
• The key support level is 0.722 for the daily bearish reversal to be started.

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