With the next RBA (Reserve Bank of Australia) rate decision and statement just around the corner, it’s a good time to refresh our memory of the AUDUSD technical landscape.
And just so there are no false hopes, the AUDUSD technicals haven’t been the most exhilarating.
A view of the price action since late last year shows indecision.
The pair has gone nowhere in the last six months apart from the January 3rd flash crash which didn’t last long.
It’s become clear the Australian dollar needs a catalyst to end the slumber.
However, despite the uneventful price action, there are two notable technical events to consider here.
The first was the close above trend line resistance on November 1, 2018.
Although AUDUSD bulls struggled shortly after breaking out, that was a key development as it broke a ten-month downtrend.
It’s also why the January 3rd flash crash encountered support where it did.
The second and more pressing development is the descending channel you see below.
We’ve studied this pattern a few times in recent weeks. But as the chart illustrates, buyers have yet to make their move.
It does appear that the AUDUSD has carved a base over the last few months that buyers could use to take prices higher.
That said, it’s going to come down to this descending channel in my opinion.
Until buyers can clear channel resistance near 0.7180, AUDUSD will remain under pressure.
But if buyers can take out that 0.7180 resistance level, it will be off to the races.
Key resistance above it includes the 0.7300 area followed by 0.7460.
And it just so happens that we have the ideal catalyst early in Tuesday’s session in the form of an RBA rate decision and statement.
I don’t trade the news, but I do use the market’s response (price action) to catalysts to determine a market’s likely path forward.
The upcoming RBA events at 11:30 pm EST could be just what the pair needs to break free.
Then again, an unfavorable response could take AUDUSD right back to the 0.7000 handle or perhaps even lower.
Although I’m still neutral here, I would prefer to buy AUDUSD on a break of channel resistance given the blue skies that lie above it. But that’s just me.
For now, all eyes are on the market’s response to the RBA.