At A 32-Month Low, AUD/USD's Close Could Mark A Breakout Or A Fakeout
Faraday Research | Oct 26, 2018 04:55AM ET
If the trend is your friend, it’s harder to find a better example than the bearish channel on AUD/USD.
With no fewer than 1130 pips shed this year (around 14%), the trend structure remains defiantly bearish on the weekly chart. And, with no immediate signs of a bottom and a breakdown to a fresh 32-month low, bears don’t appear done.
Still, a bullish RSI divergence is forming on the weekly chart to warn of weakness to the trend and a close above 0.7041 today warns of a bear-trap. But, with such a bearish trend structure these only serve as mere warnings, so until momentum turns decisively higher, further losses are assumed. And whilst the bearish channel continues to hold we could eventually see AUD/USD headed for the Jan ’16 lows at 0.6827.
Switching to the 4-hour chart shows prices consolidating beneath the 0.7041/47 resistance zone. We’re keen to see if this holds as we head towards the US open, as bears will be looking to take it towards 0.70 and eventually the Feb ’16 lows at 0.6974.
Furthermore, another bearish channel appears to be forming suggesting the trend’s downside could be accelerating. So all in all, it’s not looking great for the bull-camp, but for now we’re keep an eye on which side of 0.7041/47 it closes on today as it could have a material impact on sentiment next week.
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