Bottom line: AUDUSD needs to break above 0.6775 resistance to confirm that a meaningful bottom is on place at 0.6662 last week.
Technical Analysis:
AUDUSD had dropped to 0.6662 lows last Friday, breaking below the previous swing low at 0.6670 levels. The drop had invalidated the case of a potential expanded flat that was being discussed here. In fact, after breaking below 0.6670 levels, AUDUSD drop from 0.7032 could be seen as the last leg of a potential diagonal structure (not shown here). The drop between 0.7032 and 0.6662 could be seen as 3 waves A-B-C and also Wave 5 termination of the potential ending diagonal. If the above is correct, AUSUSD bulls should eventually break higher above 0.7032 levels, which could be seen as Wave 4 of the diagonal. The short term wave structure should break above 0.6775 resistance to confirm that a meaningful bottom is in place at 0.6662 last week. Until that happens, AUDUSD remain vulnerable to print yet another low before reversing. Please note that any drop below 0.6662 levels would be short lived and traders might be willing to consider buying at lower levels. If prices are unfolding Wave 4 correction at the moment, then a Wave 5 drop could be expected below 0.6662 levels going forward. If the above count is correct, a potential termination for Wave 5 could be seen towards 0.6640 and 0.6620 respectively. In either of the above probabilities, AUDUSD has formed a major bottom at 0.6662 or could form one close to 0.6620 levels respectively. Most traders might be willing to remain long with protective stops below 0.6660 levels and potential targets above 0.7032 respectively. It remains to be seen how price action behaves around the 0.6775 resistance ahead. Bulls might be poised to take control back, going forward.
Prepared by
Harsh Japee, Technical Analyst.
AUDUSD Chart
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