Last weekend I commented on how AUDUSD selling pressure may be limited below 0.7160. It’s the support level of a falling wedge pattern that has been developing since July.
However, the 0.7160 support area has more going for it than that. It’s also the location of two prominent swing lows. The first occurred at the end of May 2016 and the other in late December.
That makes 0.7160 a confluence of support. It’s the intersection of a key horizontal level and falling wedge support.
I don’t see much in the way of a buy signal though, at least not yet. This week has been relatively quiet across the entire currency market, probably due to Monday’s U.S. and Canada holidays.
That said, I certainly wouldn’t suggest selling at current levels. It’s why I mentioned I’d only be watching for bullish price action from 0.7160/90 in Sunday’s forecast.
If I were forced to choose a directional bias, I’d be bullish. Yes, the pair is still trending lower, but the narrowing price action over the last few months combined with the 0.7160 support area prevents me from being bearish moving forward.
I do think the breakdown we witnessed in April was a significant turning point for the pair. That snapped a two-year rally and put the AUDUSD under severe selling pressure during the first half of June. See link above.
But as we all know, a market doesn’t move in a straight line. As long as 0.7160 support holds on a daily closing basis (New York 5 pm EST), there’s reason to suspect a bounce. Perhaps not this week, but it is a scenario that demands respect in my opinion.
Key resistance comes in at the wedge ceiling near 0.7320. There is also a good reason to keep the 0.7235 horizontal level on your chart.