AUD/USD’s rally continued last week and further rise could be seen initially this week. However, considering bearish divergence condition in 4 hour MACD, upside should be limited by 0.7896 cluster resistance (61.8% retracement of 0.8124 to 0.7500 at 0.7886) resistance zone to bring short term topping. Break of 0.7804 minor support will turn bias to the downside for 55 day EMA (now at 0.7701).
In the bigger picture, we’re still slightly favoring the case that corrective rise from 0.6826 medium term bottom is completed at 0.8124, after hitting 55 month EMA (now at 0.8032). But stronger than expected rebound from 0.7500 is dampening this bearish view. On the downside, break of 0.7500 will target 0.7328 key cluster support (61.8% retracement 0.6826 to 0.8124 at 0.7322) to confirm this bearish case. But break of 0.8124 will extend the rise from 0.6826 to 38.2% retracement of 1.1079 (2011 high) to 0.6826 (2016 low) at 0.8451 before completion.
In the longer term picture, 0.6826 is seen as a long term bottom. Rise from there could either reverse the down trend from 1.1079, or just develop into a corrective pattern. At this point, we’re favoring the latter. And, as long as 38.2% retracement of 1.1079 to 0.6826 at 0.8451 holds, we’d anticipate another decline through 0.6826 at a later stage. But strong support should be seen between 0.4773 (2001 low) and 0.6008 (2008 low).
