Procyclical currencies had a great week. The Australian dollar, in line with broader (cheerful) risk sentiment, climbed close to 3.0% against the US dollar, posting a five-week loss streak for the beleaguered AUD/USD pair. Curiously, the price forged its recent bottom a whisker above weekly demand at $0.5975-0.6166, a base with a Fibonacci projection ratio of 1.618% at $0.6024 (an ‘alternative’ AB = CD- cartridge).
While last week has indeed wiped out the previous week’s losses, is it enough to create a climate of confidence in this market? The trend says no, but if we see a pullback in the weekly scale, the resistance is capped at $0.6673. The price reflects a bear trend since $0.8007 (February 22nd high) ) on the weekly; the monthly timeframe has also been on a longer-term downward trend since August 2011, indicating that it will rally from the pandemic low of $0.5506 (March 2020) to a high of $0.8007 (February 2021) on the weekly timeframe. seen as a deep setback among Chartists.
Meanwhile, the Relative Strength Index (RSI), a popular momentum meter, observed a trendline break in resistance drawn from the high 64.39 on the daily timeframe. This follows positive (regular) divergence and pulls the value of the indicator within tangent distance of the 50.00 centerline.
You will also notice that the price move is approaching the low of the resistance at $0.6401 and testing the high of a potentially bearish flag pattern (low: $0.6170 high: $0.6347). The $0.6401 resistance will therefore be a test for bulls this week. A close rise suggests strength and buying further until at least daily resistance at $0.6678 (near the weekly resistance), while a rejection, and near the lower limit of the daily bearish flag pattern, moves signals into the current weekly demand zone.
In the short term, in the H1 time frame, buyers and sellers are competing for a position near the bottom of $0.64. This will be interesting for traders early in the week (round numbers tend to attract attention). However, it is the price levels above this psychological level that can draw attention.
Two Fibonacci projection ratios of 1.272% at $0.6421 and $0.6415, as well as primary resistance at $0.6446-0.6440 are important areas to consider. A whipsaw above $0.64 could therefore cause sellers to try to fade buy-stop momentum north of the figure at the aforementioned resistances, which could pull the currency pair back to support at $0.6346.
While a surge in buying unfolded above weekly demand last week at $0.5975-0.6166, bearish technical elements are now overshadowing all bullish indications: the combination of the long-term downtrend, daily resistance at $0.6401 and a potential daily bearish flag.
Should a (bulltrap) stop run above $0.64 occur, i.e. in either the H1 1.272% Fibonacci projection ratios at $0.6421 and $0.6415 or prime resistance at $0.6446-0.6440 , then this H1 price target is likely to support at least from $0.6346.