9 Aug 2013
Overcrowded AUD/USD short trade gets crushed. Does the rally have legs?
FXstreet.com (Barcelona) - A less-dovish RBA and a potentially bullish tell from China have combined to electro-shock the AUD/USD back to life. Will it last or is there more downside to come?
AUD/USD boosted by a couple of data points – is it enough to make the rally stick?
The AUD/USD has rallied out of a very oversold condition and just above projected support at 0.88413 thanks to a defiant Reserve Bank of Australia and Chinese trade balance data. The RBA got things going just when it seemed the world was ganged up against the AUD/USD. Then, the surprisingly bullish Chinese trade balance data gave the already buoyant AUD/USD an extra boost of energy – enough to bring the cross right up to another “critical” resistance level. Now, traders are asking, “Where to next?”
Technical outlook for AUD/USD
The sharp rally that has taken place in the AUD/USD has thrown some technicians’ prognostications and analyses asunder. Those analysts have had to go back to the drawing board to see whether they were wrong big - meaning this is the beginning of a new bull phase for AUD/USD – or wrong small – meaning they were just off a bit on where AUD/USD is in the upside correction process. The crowd of analysts is still split on the subject.
Those technicians that are bearish identify a key resistance level at around 0.9138 as their “line in the sand”. That level represents the 100% Fibonacci price projection for what they believe is an “abc” correction to the upside. Additionally, that level represents a 61.8% retracement of the 7/24 – 8/4 decline. Any close above that level will mean that their overall bearish thesis on AUD/USD is wrong and that any bearishly positioned trades should be closed out. The next target on the upside if AUD/USD breaks above resistance will be the 0.9196 – 0.9231 Fibonacci-generated range.
AUD/USD boosted by a couple of data points – is it enough to make the rally stick?
The AUD/USD has rallied out of a very oversold condition and just above projected support at 0.88413 thanks to a defiant Reserve Bank of Australia and Chinese trade balance data. The RBA got things going just when it seemed the world was ganged up against the AUD/USD. Then, the surprisingly bullish Chinese trade balance data gave the already buoyant AUD/USD an extra boost of energy – enough to bring the cross right up to another “critical” resistance level. Now, traders are asking, “Where to next?”
Technical outlook for AUD/USD
The sharp rally that has taken place in the AUD/USD has thrown some technicians’ prognostications and analyses asunder. Those analysts have had to go back to the drawing board to see whether they were wrong big - meaning this is the beginning of a new bull phase for AUD/USD – or wrong small – meaning they were just off a bit on where AUD/USD is in the upside correction process. The crowd of analysts is still split on the subject.
Those technicians that are bearish identify a key resistance level at around 0.9138 as their “line in the sand”. That level represents the 100% Fibonacci price projection for what they believe is an “abc” correction to the upside. Additionally, that level represents a 61.8% retracement of the 7/24 – 8/4 decline. Any close above that level will mean that their overall bearish thesis on AUD/USD is wrong and that any bearishly positioned trades should be closed out. The next target on the upside if AUD/USD breaks above resistance will be the 0.9196 – 0.9231 Fibonacci-generated range.