AUDUSD is up 0.8% after reversing on Friday from 3-months lows. The pair still looks bearish in the short term but downside momentum has paused just above the 50% Fibonacci retracement of the upleg from 0.7328 to 0.8124. Strong support is expected at this level at 0.7724.
Resistance levels appear at 0.7818 and 0.7935. Any gains above the key psychological level of 0.8000 would give scope for more near-term strength to test the May high of 0.8124. From here, AUDUSD would be on a path for further gains to resume the May to September uptrend.
Short-term risk is still tilted to the downside since the market has broken below the 50-day moving average. Momentum signals are bearish too. MACD is below zero and RSI is below 50, although the indicator has stopped falling ahead of oversold territory. This points to near-term consolidation or a pull-back in prices.
Break of support at 0.7724 would turn the focus back to the downside to target 0.7630 and then 0.7520 ahead of the May low of 0.7328.
While downside pressure appears to have eased for now following Friday’s reversal, there is no clear indication that the bearish phase has ended. The market would have to reclaim the 0.7900 handle to change this view.
