AUD/USD rallied on Friday, breaking above the neckline of a complex inverted “head and shoulders” formation, as well as above the key resistance zone between 0.6775 and 0.6780. The pair has also emerged above its 200-EMA, which combined with the aforementioned technical signals paints a positive near-term picture.
If the bulls are willing to stay in the driver’s seat, we would expect them to challenge soon the 0.6805 zone, marked by the high of September 24th. If they prove strong enough to overcome it, then we could see the rally extending towards the 0.6830 zone, which is near the high of September 19th and is also marked by the inside swing low of September 17th. Another break, above 0.6830, may set the stage for even higher levels, one of them being the 0.6860 zone.
Looking at our short-term oscillators, we see that the RSI lies fractionally below 70 and points up. It could emerge above that level soon. The MACD lies above both its zero and trigger lines, pointing up as well. Both indicators detect strong upside speed and support the notion for more advances in this exchange rate.
On the downside, we would like to see a strong dip below 0.6725 before we abandon the bullish case and start aiming for lower levels. Such a move could initially aim for the 0.6702 barrier, which is the low of October 3rd. If that level is not able to withhold the pressure, its break may encourage the bears to put the low of October 2nd on their radars, which stands at 0.6670.
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