AUD/USD Forecast: Eyes break above 5-month long falling trendline

Technicals and Fundamentals are aligned in favor of a short-term bullish move.
The long-term outlook remains bearish, as indicated by the monthly chart.

Omkar Godbole FXStreet Contributor

The AUD/USD will likely take out the resistance offered by the trendline sloping downwards from the Jan. 26 high and April 9 high and in the next 24 hours and could extend gains to 200-day moving average (MA) located at 0.7756.

Daily chart

The pair created a bullish outside-day candle last Wednesday, signaling a resumption of the recovery from the May 9 low of 0.7412.

Further, the pair created a dragonfly doji on Friday and has posted solid gains today confirming a short-term bearish-to-bullish trend change.

The chart also shows a higher lows and higher highs pattern, indicating a bullish setup.

The 5-day moving average (MA) and 10-day MA bullish crossover also support the bulls. Meanwhile, the 14-day relative strength is also biased bullish (above 50.00).

The bullish story does not end here... the 50-day MA has shed bearish bias (is no longer sloping downwards) and the pair sees to have found acceptance above the key moving average.

Weekly chart

The pair has created a small rounding bottom-like pattern, as represented by multiple long-tailed weekly candles.

The 5-week MA and 10-week MA are beginning to curl upwards in favor of the bulls.

Clearly, the technicals are biased bullish. Meanwhile, fundamentals are also aligned in favor of the Aussie bulls-

Italian fears have receded.
Australia retail sales bettered estimates, Q1 corporate profits jumped and companies paid record wages/salaries to employees in the first quarter.

The upbeat data have triggered speculation that Aussie Q1 GDP, due this Wednesday, will likely beat estimates.

The only risk to the short-term bullish outlook stems from the possible escalation of a trade war between the US, China and EU.

View

The pair will likely chew through 0.7638 - descending trendline resistance in the next 24 hours. A move above the trendline hurdle would only strengthen the bullish case and would allow a rally to the 200-day moving average of 0.7756.

The long-run outlook remains bearish as indicated by a bear flag breakdown and downward sloping 5-month MA and 10-month MA.

Monthly chart

Only a monthly close above the rising trendline (lower end of the flag) would abort the long-run bearish outlook.

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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