After the extensive bullish rally, the AUDUSD pair found strong resistance at 0.81140. From that level, the pair started its bearish rally and breached the major bullish trend line support level at 0.76454. Most professional price action traders made a decent profit by shorting the AUDUSD pair after a daily closing of the price below the trend line support zone. The bears got exhausted after the pair hit the major support level at 0.70435. Since we have a cluster of a supportive candle just below that level, most of the aggressive traders already went long in the AUDUSD pair. Though the execution of long trade under the recent formation of the bearish trend seems to be a little bit risky a sharp decline is most likely to be followed by a bullish correction.
AUDUSD technical chart analysis
Figure: AUDUSD preparing for a bullish correction
From the above figure, you can clearly see the major support level at 0.70435 is providing fresh buying momentum to this pair. If the current support level holds, the ultimate target for this pair would be the 38.2% bearish retracement level. The trend traders will be cautiously looking for bearish price action confirmation signals near the critical resistance level at 0.74502 to execute a trade in favour of the medium term bearish trend. However, a daily closing of the price above that level will eventually lead this pair towards the 50% retracement level. From this level, we might see some ranging markets since the buyers will have to work really hard to test the 61.8% bearish retracement level. According to the leading analysis of the reputed Forex broker, there is high a likelihood of getting perfect short trading opportunity near the major resistance level at 0.77120. However, a clear break of the price above that level will confirm the potential bottom formations of this pair near the major support level at 0.70435.
On the downside, we need to break below the current support level at 0.70435 to establish fresh selling momentum to this pair. A daily closing of the price below the current support level will eventually lead this pair towards the next major support level at 0.68320. Most of the professional traders will be cautiously looking at this level since a clear break of the price below this level will result in a sharp decline. A daily closing of the price below the major support level at 0.68320 will ultimately lead this pair towards the next major support level at 0.60205.
The recent performance of the U.S economy is not up to the mark and things have been intensified due to the ongoing issue of U.S rate hike. According to the leading economist, if the FED officials want to come up with a rate hike program prior to the closing of this year, they need strong data in the U.S labour field. The long-term traders are now cautiously waiting for upcoming FOMC meeting minutes to understand the current sentiment of the leading FED officials regarding their next rate hike program. The Aussie economy though is showing great signs of recovery from the last couple of weeks. However, the market is most likely to be dry since we don’t have any major news release for the Aussie economy in this upcoming week. So the fundamental traders will be looking to trade the AUDUSD pair based on the U.S economic news release.
However, on December 4th we have RBA statement and cash rate decision. The conservative traders are advised to stay on the sidelines and wait for a clear clue to trade this market. If the Aussie government tightens their current monetary policy, the chances are very high we will see an extended bullish correction in the AUDUSD pair. Considering the technical and fundamental parameters, short-term buying with a tight stop loss seems to be the only rational steps to trade the AUDUSD pair.
by Dwayne Buzzell