Since breaking trend line support on September 21, the AUDUSD has been in a freefall. The pair has lost 450 pips since the September 22 retest of former trend line support as new resistance.
However, recent price action hints at a possible floor just below Friday’s low at 0.7535.
Up until this past week, the pair had carved a series of lower lows. If the Wednesday to Friday low at 0.7550 holds up next week, it would be the first higher low in months.
It’s important to remember that we can’t technically call this a higher low just yet, though. In order for that to happen, buyers need to push prices above the November 27 high at 0.7644.
And for me to consider this a buying opportunity, I need to see a daily close (5 pm EST) above the 0.7635 handle. Only then can we claim that buyers are starting to regain control.
A daily close above 0.7635 next week would expose the next key resistance at 0.7730. The area served as a pivot between October 6 and November 2. It also played a role in capping the mid-June advance. Beyond 0.7730 we have 0.7820 followed by 0.7955.
Alternatively, a daily close below the November low at 0.7535 would negate any notion that AUDUSD bulls are in command of the situation.
If this is indeed a falling wedge, we should see buyers flock to the 0.7580 area if tested next week. I wrote a question mark next to the support level below because the pattern isn’t quite as clean as I like to see.
Still, it does appear that the Australian dollar is starting to get squeezed. If so, a pop higher could be just around the corner.