AUDUSD has fully recovered the virus-led sell-off within a narrow upward-sloping channel but December’s peak of 0.7031 managed to stabilize the rally, preventing the bulls to hunt new highs.
According to the RSI and the Stochastics the pair is overbought as the former has already topped above 70, while the latter has reversed south and below 80. Hence, downside corrections are highly likely, and traders could seek support near the supportive red Tenkan-sen line currently at 0.6860. A break lower could be trapped somewhere between the 20- and 200-day simple moving averages (SMAs) at 0.6730 and 0.6655 respectively, where any violation would clearly push the price out of the channel, triggering a steeper downfall probably towards the 50-day SMA at 0.6515 and the 0.6565 barrier.
Alternatively, if any decline proves short-lived, with the pair likely hitting a floor near 0.6860, the spotlight would turn again to the 0.7030-0.7080 resistance zone. Should the bulls pull down the wall this time, the rally could head for the 0.7200 mark, which pressured the market early in 2019. Not far above, the 0.7292 number could prove more challenging as the 200-weekly SMA happens to be flattening around this point.
Meanwhile in the medium-term picture, the bullish cross between the 20- and the 200-day SMAs is suggesting that the neutral outlook could switch to positive, though a decisive close above 0.7030 is required to achieve that goal.
Summarizing, AUDUSD is expected to remain under pressure in the short-term, with the 0.6860 level likely attempting to add some footing. A rebound above 0.7080 could put the pair back on the positive path both in the short- and the medium-term timeframes.
