Australian dollar buyers may be gearing up for action after a short downswing. Think AUD/USD is ready to extend its weeks-long uptrend? We’re taking a closer look at the 4-hour chart!
AUD/USD: 4-hour Chart
Risk assets like the Australian dollar turned lower yesterday after a lack of fresh catalysts encouraged some traders to second-guess China’s latest monetary stimulus measures and price in their global growth concerns.
The U.S. dollar, on the other hand, had a good Wednesday despite a light U.S. data calendar. The Greenback pulled back some of its weekly losses ahead of Thursday’s FOMC member speeches and Friday’s U.S. core PCE price index report. Remember that directional biases and volatility conditions in market price are typically driven by fundamentals. Suppose you haven’t yet done your homework on the U.S. and Australian dollars, then it’s time to check out the economic calendar and stay updated on daily fundamental news!
Will the dollar extend its gains against the Aussie?
AUD/USD, which got rejected from the .6900 psychological handle, may find support from the .6825 previous resistance levels. As you can see, the broken resistance zone lines up with the 38.2% Fibonacci retracement levels and is not too far from the 4-hour chart’s Pivot Point (.6780) line.
More importantly, AUD/USD is hanging out near a trend line support that’s been around since the second week of September.
Look out for sustained trading above .6850, which could set AUD/USD up for a retest of the .6900 previous highs. And, if fundamentals provide a bullish momentum for AUD, we could see AUD/USD make new monthly highs near .7000.
Further bearish moves aren’t off the table, however.
Sustained trading below the trend line and the .6800 support zone could lead to AUD/USD dropping to lower inflection points. In this case, we’re eyeing a potential drop to the .6725 – .6750 levels near the S1 (.6721) Pivot Point and the 100 and 200 SMAs.
Conclusion
The Australian dollar (AUD) appears to be at a critical juncture as traders anticipate its next move following a short-term downswing. With AUD/USD hovering near key support levels, including the .6825 zone and a trend line established since mid-September, there is potential for the pair to bounce back and continue its upward trend.
The combination of technical factors, such as the alignment of the 38.2% Fibonacci retracement with previous resistance levels, suggests that the pair could recover, especially if fundamental news supports bullish momentum.
If the Aussie holds above .6850, it might retest the .6900 highs and potentially push toward the .7000 mark, indicating optimism for AUD strength.
However, downside risks remain significant. If AUD/USD fails to maintain its support levels and breaks below .6800, it could signal a further decline toward the .6725 – .6750 range, supported by pivot points and moving averages.
This scenario could reflect renewed global growth concerns, particularly if China’s stimulus measures fail to inspire confidence or if the U.S. dollar continues to gain strength on positive U.S. data.
Overall, traders should closely monitor both technical indicators and upcoming fundamental developments to gauge whether the Aussie will rally or face a deeper correction.
Article Source: Baby Pips
