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Trader, analyst and instructor with a 6-year experience

FBS: double bottom in AUD/USD

Despite all the bearish skepticism, the Australian dollar extends recovery from the 100-month MA at $0.8850. On Tuesday the pair came close to the $0.9300 mark (above 23.6% Fibo). Lowered RBA rate cut chance, improving China’s statistics and mixed expectations on Fed’s QE “Septaper” keep supporting the Aussie.

As can be seen from the daily chart, the pair has almost formed a “double bottom” bullish reversal pattern. Daily MACD has returned into the positive zone for the first time since spring. However, the $0.9300/20 (daily Ichimoku) area is serious resistive zone for the pair. There is a high chance for the Aussie’s recovery to slow here (see the MACD divergences on smaller timeframes).

Break above $0.9320 would confirm the “double bottom”. Theoretically, the bullish correction could extend to $0.9660 (55-months MA) in the coming weeks. However, this level definitely won’t be reached if there are any signals for the US QE tapering, US intervention in Syria or a bad tone on the Asian markets. We also have to keep in mind that Australian government is still interested in a cheap currency.

So, we recommend being very cautious with long-term bullish Aussie positions. There could be a good chance to enter a small long on a break above $0.9325 with an initial target of $0.9400. Return below $0.9150 would negate the bullish prospects. 

Chart. Daily AUD/USD

AUD
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