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The USD has seen several markets test and break key levels, with its next intended victim being AUDUSD and a break of its long-term Fibonacci level.
We can see on the weekly chart that momentum clearly favours the bears and that, since breaking the Jan 2016 trendline, bearish momentum has accelerated towards current levels. But to underscore how bearish momentum is from the 0.8136 high, AUDUSD has touched the 61.8% Fibonacci retracement level of the gains from its two-year bull rally in just 22 weeks. Bearish momentum since the 0.8136 high has provided a clear break of the Jan 2016 bullish trendline which has now acted as resistance. Furthermore, the bearish hammer perfectly respected the broken trendline and now forms an important part of a bearish channel.
Still, whilst we expect prices to break lower, there is a big level to overcome; the May 2017 low and 61.18 retracement between the 2016 low and 2018 high.
Zooming into the daily we can better see how close price action is to the May 2017 low and long-term Fibonacci retracement level. And with the 10-day average capping as resistance and price sitting near the lows, it appears traders fancy another crack at taking this lower. And, given half the chance, they’d happily trade it down towards the December 2016 in line with dominant momentum.
However, it should be remembered that with big levels can come big reactions. It’s plausible that the temptation to book profits could throw a bed of support and provide a noteworthy move higher. And such a move would likely be exacerbated if US and China are to somehow patch up trade relations. But, considering the dominant bearish momentum since the 0.8136 high, an eventual break beneath it is favoured. Either way, we await a clean break of support before entering short.
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