Will AUD/USD Extend Losses In The Coming Weeks?
Blackwell Global | Jun 29, 2016 06:03AM ET
Given the recent disappointment in the Australian Housing Prices data, the Aussie dollar could be poised to extend recent bearishness. Specifically, the combination of a host of bearish technicals could exacerbate any losses resulting from weakening fundamental results. What’s more, Friday’s commodity prices outcome could add fuel to any downtrends that form in the coming week.
Firstly, a look at the daily chart reveals a long-term bearish ABCD pattern is forming and looking set to complete in the coming week or so. As shown below, the final leg is already underway and was given a kick start by the surprise Brexit referendum vote.
This final leg will complete once the AUD/USD has retraced to around the November low at the 0.7018 price level.In addition to the ABCD pattern, Parabolic SAR readings on the daily chart remain bearish despite the pair’s recent recovery.
Aside from the Parabolic SAR, a look at the EMA activity on the H4 and H1 charts also signals that the Aussie dollar is ready to take another slide lower. Specifically, on the H4 chart, the 12 and 20 period EMA’s have just intersected their 100-day counterpart. The two shorter EMA’s now lie below the 100 period average which is, of course, a highly bearish signal. Additionally, on the H1 chart, the 100 hour EMA is providing some dynamic resistance which could limit upside potential.
The H1 chart also reveals that a bearish pennant formation is nearing completion which could send the pair lower. As shown in the above chart, the AUD is likely to make a downwards movement shortly which could result in a breakout.
As already mentioned, the 100 hour EMA is providing some dynamic resistance at point D which should encourage a reversal. Furthermore, the Stochastic Oscillator is highly over bought and this should likewise be providing some strong downwards pressure.
Ultimately, the market is still reeling from the shock of the Brexit vote and this is likely to see many pairs moving to the downside in the following weeks. However, the Aussie dollar’s technicals are currently hinting that the pair is poised to tumble lower even without ongoing fallout from the Brexit referendum.
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However, keep a close watch on the impending Commodity Prices result as it could throw a spanner in the works and interrupt the AUD’s decent if the figure improves materially.
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