AUD : Rally at Resistance

(Thu, 12 Nov 2020). The Australian Dollar virtually unchanged against the US Dollar this week after a 4% rally in AUD/USD failed at a key technical confluence / multi-year downtrend resistance. The bulls are on notice with the post-election rally vulnerable heading into the close of the week. These are the updated targets and invalidation levels that matter on the AUD/USD weekly price chart. for an in-depth breakdown of this Aussie trade setup and more.

AUSTRALIAN DOLLAR PRICE CHART – AUD/USD WEEKLY

Notes: In my last Australian Dollar Weekly Price Outlook we noted that Aussie was, “testing a critical support zone and we’re looking for inflection,” as price approached the 2020/2019 objective yearly opens at 7016/42. Price continued to test this threshold for the following two weeks with an outside-weekly reversal candle off the lows last week taking Aussie back into critical resistance at the 2019 high / May 2017 low at 7295-7329.

Note that a parallel of the 2011 resistance trendline extending off the 2018 highs also converges on this zone over the next few weeks and further highlights its technical significance. The immediate advance may be vulnerable while below this threshold with a topside breach / weekly close above needed to keep fuel the next leg higher in price towards former channel support near ~7500 and the 38.2% Fibonacci retracement of the 2011 decline at 7635. A break of this week’s low risks a larger correction in the Australian Dollar with such a scenario exposing the 2016 low at 6827 and the 2008 low-week close / 38.2% retracement of the yearly range at 6660/85.

Bottom line: The Australian Dollar is testing a key technical confluence at multi-year downtrend resistance – elevated risk for inflection off this threshold with the post-election rally vulnerable while below. From a trading standpoint, a good zone to reduce long-exposure / raise protective stops – the immediate focus is on a break of the 7016-7329 range for guidance on our medium-term outlook.

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