I discussed the potential for a move higher from AUDUSD on October 5.
In that weekly forecast video, we looked at the bullish pin bar that had formed on the weekly time frame when the pair was trading around 0.6750.
Fast forward to today, and we can see that the Australian dollar is approaching two critical resistance areas.
The first is the zone between 0.6860 and 0.6880.
This area capped the pair’s advance in mid-September.
It also served as support for AUDUSD in May and June, especially if you view that price action on the weekly time frame.
The second resistance level is the descending channel top.
It’s the same pattern we used to catch the 200-pip selloff that materialized on July 24.
Depending on how quickly AUDUSD appreciates from today’s price, that channel top could be as low as 0.6910 or as high as 0.6930.
But regardless, it will be a key test for AUDUSD bulls.
If the pair can punch through that 0.6910/30 resistance area, we could see the pair break free from this downtrend that’s been in place since January 2018.
Just keep in mind that it may only be a temporary correction.
On the other hand, bearish price action such as a pin bar from 0.6910/30 would keep sellers in control a while longer.
However, the AUDUSD is just 20 pips away from carving a monthly bullish engulfing candle.
This is similar to what the EURUSD is doing so far in October. I mentioned this in Saturday’s forecast video.
A monthly close above 0.6894 would confirm the pattern on AUDUSD.
Of course, buyers still need to take out 0.6860/80 and 0.6910/30 if they want to extend the current rally.
Any rotation lower this week is likely to encounter buyers at 0.6800.