Technical Analysis – AUDUSD back inside rectangle; SMAs convergence flashing red
June 20, 2023 2:26 pm
The much-anticipated upward AUDUSD breakout managed to quickly disappoint the bulls. The pair managed to record a 4-month high of 0.6899 before quickly dropping. It currently trades around 0.6775, back inside the rectangle that has been dominating the price action since February 24, 2023, and below the November 3, 2022 upward sloping trendline.
Apart from the actual price gains, this downleg is important from a sentiment perspective. The bears probably feel in control of the market as both the RSI and the Average Directional Movement Index (ADX) are mostly on their side. The former is edging towards its 50-midpoint, while the latter appears to have topped and thus is now correcting lower. This is usually an indication that the prevailing trend has changed.
Should the bears feel inspired by the latest move, they will continue their push lower. The 38.2% Fibonacci retracement of the April 5, 2022 – October 13, 2022 downtrend at 0.6739 appears to be a lower barrier for the bears but the same cannot be said for the busier 0.667-0.6712 range. This is populated by the July 14, 2022 low and the 50-, 100- and 200-day simple moving averages (SMAs).
On the other hand, the bulls appear to pin their hopes on the stochastic oscillator. This indicator is not endorsing the current downleg as it remains at its overbought (OB) territory. Should this remain the case, the bulls could try to retest the 0.6797 level and then attempt another bullish breakout. Their main target would then be the 50% Fibonacci retracement at 0.6815.
To sum up, AUDUSD bears hold the upper hand at this juncture. However, for the correction to continue they need to break the busy 0.667-0.6712 range and capitalize on the SMAs convergence.
The much-anticipated upward AUDUSD breakout managed to quickly disappoint the bulls. The pair managed to record a 4-month high of 0.6899 before quickly dropping. It currently trades around 0.6775, back inside the rectangle that has been dominating the price action since February 24, 2023, and below the November 3, 2022 upward sloping trendline.
Apart from the actual price gains, this downleg is important from a sentiment perspective. The bears probably feel in control of the market as both the RSI and the Average Directional Movement Index (ADX) are mostly on their side. The former is edging towards its 50-midpoint, while the latter appears to have topped and thus is now correcting lower. This is usually an indication that the prevailing trend has changed.
Should the bears feel inspired by the latest move, they will continue their push lower. The 38.2% Fibonacci retracement of the April 5, 2022 – October 13, 2022 downtrend at 0.6739 appears to be a lower barrier for the bears but the same cannot be said for the busier 0.667-0.6712 range. This is populated by the July 14, 2022 low and the 50-, 100- and 200-day simple moving averages (SMAs).
On the other hand, the bulls appear to pin their hopes on the stochastic oscillator. This indicator is not endorsing the current downleg as it remains at its overbought (OB) territory. Should this remain the case, the bulls could try to retest the 0.6797 level and then attempt another bullish breakout. Their main target would then be the 50% Fibonacci retracement at 0.6815.
To sum up, AUDUSD bears hold the upper hand at this juncture. However, for the correction to continue they need to break the busy 0.667-0.6712 range and capitalize on the SMAs convergence.
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