AUD/USD Trades Within A Descending Triangle

AUD/USD tumbled during the Asian morning Tuesday, as the language in the RBA meeting statement was softer than previously. The slide came after the rate hit resistance near the 0.7130 zone, but it was stopped at the key hurdle of 0.7065, which has been providing strong support to the price action since March 20th. With the rate staying supported near that zone, but at the same time, printing lower highs, we could say that AUD/USD is trading within a descending triangle formation. Thus, up until the rate exits the pattern, we prefer to stand pat.

A clear dip below 0.7065 would confirm a forthcoming lower low on the 4-hour chart, also signaling the downside exit out of the triangle. This may prompt the bears to aim for the 0.7040 barrier, which is fractionally below the low of March 14th, from where the rate could rebound and test the 0.7065 zone as resistance this time. If the bears manage to stay in control and not allow a return within the pattern, then we could see them pushing the battle below 0.7040, something that may pave the way towards the 0.7005 zone, or the psychological number of 0.7000.

Turning gaze to the short-term oscillators, we see that the RSI fell below 50, but after AUD/USD tested 0.7065, the indicator ticked up. The MACD, already below its trigger line, has just touched its toe below zero. These indicators detect negative momentum, but the minor rebound of the RSI enhances our choice to wait for a clear break below 0.7065 before we get confident on more downside extensions.

On the upside, we would like to see a clear move above the crossroads of the 0.7130 level and the upper bound of the triangle before we start examining whether the bulls are trying to gain the upper hand. Such a move could initially aim for the high of March 26th, at around 0.7147, the break of which may extend the recovery towards 0.7168, defined by the peak of March 21st.