The AUD/USD pair has recently shown signs of a potential bullish reversal, beginning a new leg higher after bottoming out on September 11. This move has been characterized by a break above a crucial trendline, suggesting that the pair is now in a short-term uptrend. Adhering to the classic principle of technical analysis, “the trend is your friend,” the AUD/USD appears poised for further gains. However, it faces some resistance levels that might slow its ascent.
Recent Technical Developments
Over the past week, the AUD/USD has been stepping higher, adhering to a series of key moving averages that have marked its path upward. These technical milestones have provided the necessary support and direction for the current rally. Here’s a breakdown of how the pair has developed this bullish bias over the last several trading sessions:
- Five Days Ago: The price found a base against the 200-day moving average (MA), which acted as a solid support level. This prompted a move higher, indicating the presence of buyers willing to defend this key level.
- Four Days Ago: The pair then based against the 200-bar moving average on the 4-hour chart and the 100-day moving average. The confluence of these moving averages served as a strong support zone, encouraging further upward movement.
- Three Days Ago: The price formed a base against the 200-hour MA and a swing level near 0.6700. This level was crucial as it signaled a short-term floor for the pair, which led to another leg higher.
- Yesterday: The price managed to move above its 100-bar moving average on the 4-hour chart. After breaking this level, it based against it, indicating a successful retest and solidifying the bullish bias.
- Today’s Trading: The AUD/USD moved above a swing area between 0.6748 and 0.6760. However, it failed to maintain the momentum, leading to a slight pullback and introducing some apprehension among traders.
Resistance Levels and Key Swing Areas
The current short-term uptrend in the AUD/USD pair suggests that it is likely to continue higher, potentially matching or almost matching the August 29 high of 0.6824. However, there is a notable resistance level at 0.6799, which coincides with the July high. This area could slow down the pair's ascent, acting as a potential barrier to the ongoing rally.
Moreover, the swing area between 0.6748 and 0.6760 is crucial. Although the price managed to break above this area today, it failed to sustain the momentum. This minor failure has introduced some caution into the market, especially with the key Federal Open Market Committee (FOMC) rate decision looming tomorrow. Traders are now closely watching how the pair navigates this region, as it will provide insights into the strength of the current uptrend.
What’s Next for AUD/USD?
Given the pattern observed over the past few days, traders should be vigilant about the support levels that have facilitated the recent upward movement. The last broken level, which is the 100-bar moving average on the 4-hour chart at 0.6732, will be critical. As long as the price remains above this level, buyers retain control, and the bullish bias is intact. However, a break below this level could trigger more selling pressure, especially if market participants view it as a failure to sustain the upward momentum.
Conversely, if the AUD/USD can regain its footing and break back above the 0.6760 level, it could signal a resumption of the uptrend. In this scenario, we might see increased momentum that could propel the pair towards the high prices seen at the end of August, with the next major resistance coming in around the 0.6824 mark.
Buyer Control and Potential Risks
While buyers remain in control for now, the minor failure to maintain a break above the swing area today has introduced some uncertainty. The impending FOMC rate decision adds to this apprehension, as it could significantly impact the US dollar and, by extension, the AUD/USD pair. Traders should be cautious and closely monitor the support at 0.6732, as a break below this level could lead to a deeper correction.
In summary, the AUD/USD is currently in a short-term uptrend, with buyers maintaining control as long as key support levels hold. The resistance at 0.6799 and the potential swing area between 0.6748 and 0.6760 will be important levels to watch in the coming days. The trend remains the primary guide, but traders should be prepared for potential volatility around the FOMC decision and any failure to hold crucial support levels.
