Matt Weller, CFA, CMT
Faraday Research
Last week, we highlighted a crystal-clear bullish channel in GBPAUD and discussed the technical setup that suggested rates could rise to 1.9335 next (see “GBPAUD Peeking Out to a New 5-Year High – Could 1.94 Be Next?†for more). As it turns out, there’s a similarly strong bearish channel on the more widely-traded AUDUSD, suggesting that the beleaguered pair may soon revisit its 5-year low at .8070.
The bearish channel began back in mid-November, when the pair’s short-term bounce from .8540 sputtered out (not shown). Over the past four weeks, rates have tested the bearish trend line resistance nine separate times, with sellers rising to defend that barrier each time, including in today’s Asian session.
Beyond the price action channel, the pair’s RSI indicator has been mired in bearish territory since rates peaked near .8700 last month. The normal overbought/oversold “thresholds†have now shifted down 10-20 points, so that “overbought†territory (where the prices tend to reverse back lower) is now in the 50-60 range, instead of at 70. As long as this dynamic holds and the RSI indicator remains below 60, it supports the bearish trend in AUDUSD.
Despite the holiday week, there is still a decent amount of US data that could impact all USD pairs (see below), but the technical downtrend remains the dominant theme in AUDUSD for now. As long as that channel holds, the pair’s bias will remain lower for a possible drop to the 5-year low at .8070 in the coming days. Only a surprise move above the bearish channel and the .8200 round handle would erase this week’s bearish bias.
Key Economic Data/News that May Impact AUDUSD this Week (all times GMT):
Ø Today: US Existing Home Sales (15:00)
Ø Tuesday: US Durable Goods Orders and Final Q3 GDP (13:30), US New Home Sales and Core PCE (15:00)
Ø Wednesday: US Initial Unemployment Claims (13:30)
Ø Thursday: No major data releases
Ø Friday: No major data releases
This research is for informational purposes and should not be construed as personal advice. Trading any financial market involves risk. Trading on leverage involves risk of losses greater than deposits.
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