Last week, AUD/USD corrected lower as it failed to break above the weekly resistance. Will bears take advantage and press the pair lower or will the market resume bullish price action?
AUD/USD Technical Outlook
· The price develops a continuation pattern
· AUD/USD may resume bullish price action
On November 17, AUD/USD failed to overtake the weekly resistance at 0.7338 then retreated after. Ultimately, a weekly candlestick closed modestly in the green with a 0.2% gain. Alongside that, the Relative Strength Index (RSI) fell from 65 to 60 indicating that bulls were losing momentum.
AUD/USD Daily Price Chart (August 24 – November 23, 2020)Chart source, Webtrader, Capex.com
On November 3, AUD/USD broke above the sloping bearish trendline then climbed to the current 0.7200 – 0.7412 trading zone. Later on, the price developed a bullish rectangle pattern hence, a break above its upper line could send the price for a test of the high end of the zone at 0.7412 the monthly resistance).
A daily close above the high end of the zone may cause a rally towards the monthly resistance at 0.7525.
On the other hand, a close below the low end of the zone at the key psychological level 0.7200 may encourage bears to press AUDUSD even lower towards 0.7075.
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AUD/USD Four Hour Price Chart (November 1 – November 23, 2020)Chart source, Webtrader, Capex.com
On November 12, AUD/USD broke below the bullish trendline that originated from the November 2 low at 0.6989 and started a sideways move creating a higher low with a lower high.
In conclusion, while the price trades without a clear direction a violation of the second bullish trendline originated from the November 2 low generates a bearish signal. Thus, a break below 0.7284 could send AUD/USD even lower towards the low end of the current trading zone discussed above on the daily chart at 0.7200. On the flip side, a break above 0.7441 may trigger a rally towards 0.7514. As such, the support and resistance levels underlined on the chart should be kept in focus.
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