- The oversold RSI on the 1 hour chart triggered an intraday short hedging move around AUD / USD.
- Breaking a shoulder head shoulder formation supports additional short-term losses.
- The 100-day SMA, around the 0.7620 region, should limit any significant recovery attempts.
The pair AUD/USD saw strong selling during the early part of trading action on Thursday and fell to the lowest level since late December, around the 0.7530 region.
However, the oversold RSI (14) on the 1 hour chart triggered an intraday short hedging bounce and helped the pair trim a portion of its initial lost ground. The pullback in US Treasury yields kept the US dollar bulls on the defensive, which, in turn, was seen as a key factor that extended some support to the AUD / USD pair.
Looking at the bigger picture, this week’s failure near the 0.7660-65 area validates the breakout of the head and shoulders pattern and supports the prospects for further weakness. The aforementioned region marks the breakout point of the bearish pattern support and should act as a key point for short-term traders.
Meanwhile, the technical indicators on the 4-hour daily charts remain deep in the bearish territory and are still far from being in the oversold zone. Therefore, any subsequent rally could still be seen as a short opportunity near 0.7600. This, in turn, should limit the AUD / USD pair near the 100-day SMA, around the 0.7620 region.
On the other hand, the daily swing lows, around the 0.7530 region, now become immediate support to defend. This is followed by the key psychological level of 0.7500, which if decisively broken will add credibility to the bearish outlook and pave the way for an extension of the recent sharp pullback from the three-year highs.
The next relevant support on the downside is pegged near the 0.7460 region before the AUD / USD pair finally declines further towards 0.7400. The downward trajectory could be extended further and allow bearish traders to challenge very important support 200-day SMA, currently near the 0.7375 region.
Daily chart
Technical levels
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