Key Points:
- Price action fails to break through bearish trend line.
- Key support zone is looming.
- Watch for a break lower and towards support at 0.7320
The embattled Aussie Dollar might be about to disappoint the bulls again as price action sets up for a potential tumble. The past few days has seen price action trending in a largely sideways direction after having failed to break through the long term descending trend line. Subsequently, the pair is now facing a potential collapse back towards the 73 cent handle if the current short term channel fails to hold.
In fact, a cursory review of the 4-hour chart demonstrates the pair’s current dilemma with price action flirting with breaking the current support zone around 0.7416. The AUDUSD has also managed to drop through the 100 and 50 EMA’s which provides further evidence of the bearish contention. Also, price is currently moving in impulse waves and, given the recent failure to breach the bearish trend line, the time has likely come for a wave lower. In addition, the RSI Oscillator is still currently declining within neutral territory which suggests that it still has plenty of room to move on the downside. Subsequently, there are plenty of reasons to suggest that the pair’s direction in the coming days is likely to be in negative in nature.
Fundamentally, the Australian economy has also seen plenty of negative sentiment over the past few weeks with a fairly well founded concern over the impact of a Chinese slowdown on export demand. Although this slowdown has been ongoing for some time it’s just now that the impact of it is finally flowing through the expectations channel. Subsequently, this is likely to start impacting business and consumer confidence and could put a crimp on the RBA’s plan to hold rates steady over the medium term.
Ultimately, the pair is likely to have a fairly torrid few days if price action indeed breaks through the current support zone. Subsequently, the most likely scenario is one where price meanders sideways for the remainder of today’s session before breaking lower and moving fairly rapidly towards the initial target at 0.7320. However, be aware that the U.S. NFP figures are due out in the next few days and is likely to bring plenty of volatility with it.
