AUDUSD shifted to neutral after failing to make a sustained move above the key psychological level at 0.8000. After a brief spike to a more than two-year high of 0.8065 on July 27 the market reached extreme conditions as the RSI reached overbought levels.
Momentum signals are weak and consequently AUDUSD is now consolidating around the 23.6% Fibonacci retracement level of the rise from 0.7328 to 0.8065, at 0.7888. Both MACD and RSI are pointing down, giving room for more weakness in the market.
Support is expected at 0.7785, which is the July 18 low and the 38.2% Fibonacci retracement level. A breakdown at this point would bring AUDUSD under more pressure to drop to the 50% Fibonacci at 0.7695. From here the market would turn increasingly more bearish and reverse the uptrend that took place from 0.7328 to 0.8065.
The short-term bias is expected to remain neutral with the odds of downside risk increasing on a break below current support. Only a bounce back up to break the key 0.8000 resistance level would indicate the current neutral phase has ended and there would be a resumption of the uptrend. In the bigger picture, the medium-term bullish market structure remains intact and there has not been any clear indication of a change in the underlying trend.
