Technical Analysis – Is AUDUSD ready for a downward breakout?
May 24, 2023 12:25 pm
AUDUSD is edging lower today, testing the lows of the rectangle that has been in place since February 24. This is the bears’ third attempt to finally break the lower boundary of this range. For this potential breakout to be considered as valid, the bears need at least three daily closes well below the current 0.6563 level.
With the simple moving averages (SMAs) edging lower, the focus turns to the momentum indicators. The RSI has been hovering below 50 and appears to be edging even lower now, and, more importantly, theAverage Directional Movement Index (ADX) has moved about its 25-threshold, signaling a muted bearish trend. Similarly, the stochastic oscillator has dropped at its oversold territory, confirming the bearish pressure. However, it needs an even lower print to avoid signaling a bullish divergence.
Should the bears manage to break the current rectangle, they would quickly come up against the 23.6% Fibonacci retracement of the April 5, 2022 – October 13, 2022 downtrend at 0.6521. The path then appears to be clear until the November 3, 2022 low of 0.6271.
On the other hand, if the bulls successfully defend the lower boundary of the rectangle, they would then try to push AUDUSD towards the busy 0.6681-0.6702 area. This is populated by the 50- and 200-day SMAs, and the July 14, 2022 low. The bulls would then aim for 0.6739, before setting their eyes on the key 0.6775-0.6797 range, where the upper boundary of the rectangle lies.
To conclude, AUDUSD bears appear determined to break the recent rectangle on the downside, with some help from momentum indicators.
AUDUSD is edging lower today, testing the lows of the rectangle that has been in place since February 24. This is the bears’ third attempt to finally break the lower boundary of this range. For this potential breakout to be considered as valid, the bears need at least three daily closes well below the current 0.6563 level.
With the simple moving averages (SMAs) edging lower, the focus turns to the momentum indicators. The RSI has been hovering below 50 and appears to be edging even lower now, and, more importantly, the Average Directional Movement Index (ADX) has moved about its 25-threshold, signaling a muted bearish trend. Similarly, the stochastic oscillator has dropped at its oversold territory, confirming the bearish pressure. However, it needs an even lower print to avoid signaling a bullish divergence.
Should the bears manage to break the current rectangle, they would quickly come up against the 23.6% Fibonacci retracement of the April 5, 2022 – October 13, 2022 downtrend at 0.6521. The path then appears to be clear until the November 3, 2022 low of 0.6271.
On the other hand, if the bulls successfully defend the lower boundary of the rectangle, they would then try to push AUDUSD towards the busy 0.6681-0.6702 area. This is populated by the 50- and 200-day SMAs, and the July 14, 2022 low. The bulls would then aim for 0.6739, before setting their eyes on the key 0.6775-0.6797 range, where the upper boundary of the rectangle lies.
To conclude, AUDUSD bears appear determined to break the recent rectangle on the downside, with some help from momentum indicators.
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