AUD/USD Price Analysis: Bulls testing bearish commitments at resistance

  • AUD/USD is in a current bullish environment according to technical indicators.
  • However, bears could be encouraged at near-term resistance structures.
  • Longer-term, there will be bearish prospects below 0.6960 and 0.7020. 

AUD/USD has been in the hands of the bears while correcting five months of an otherwise uninterrupted bull trend.

The 38.2% Fibonacci retracement is way down at 0.6680, although there is plenty of demand in 0.7020 which will need to be cleared if there is to be an extension as deep.

While the fundamental case for a weaker dollar is compelling given the prospects of a Biden victory and of global reflation amid large scale fiscal stimulus post-election, the following illustrates the technical bearish argument for AUD.

Monthly chart

The market is in a phase of distribution that can be expected to continue if price obeys the impulse and correction wave theory. 

For instance, the monthly wick is expected to be filled in when analysing the price action on the weekly chart as follows:

Weekly chart

The latest weekly candlesticks show that the price has corrected the bearish impulse to a resistance structure.

Price can be expected to continue the current downside leg in a fresh bearish impulse to test the bullish commitments between 0.6960 and 0.7020.

Daily chart

The daily chart is consistent with the technically bearish case while the price is below the 21-day moving average and resistance structures. 

4-hour bullish environment

Meanwhile, however, the immediate picture is bullish while the price trades above the 21-moving average with MACD above zero. 

On the other hand, the trendline resistance and prior near-term support structure could well contain the bulls and encourage selling towards a test of the 0.70 figure.

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