AUD/USD opened with a positive gap on Monday after the center-right Liberal/National Coalition surprisingly won Australia’s federal elections. The recovery continued throughout the Asian trading, but during the European morning, the rate hit resistance near 0.6935 and pulled back. The pair continues to trade below the short-term downtrend line drawn from the high of April 17th, as well as below all three of our moving averages. Therefore, we still see a somewhat negative near-term outlook and we would treat the overnight recovery as a corrective bounce.
If the bears are willing to take advantage of the rebound and take charge from current levels, we would then expect them to drive the battle down, towards the 0.6890 zone, where the rate hit support just after opening with a gap. The rate could rebound again somewhat from that area, but if the bears are able to re-take the reins from below the downtrend line, then we may see them breaking below 0.6890 and aiming for Friday’s low, at around 0.6865.
Turning attention to our short-term oscillators, we see that the RSI crossed above 50 overnight, but ticked down thereafter and is now looking ready to fall back below its equilibrium line. The MACD is negative, above its trigger, but shows signs of slowing. It could soon turn south as well. These indicators suggest that AUD/USD could start gaining bearish momentum again, which supports the notion for another leg lower.
On the upside, we would like to see a break above 0.6965 before we start examining a short-term trend reversal. Such a break could initially pave the way towards the 0.6985 level, the break of which may allow extensions towards the 0.7010 obstacle. If the bulls are not willing to stop near that barrier either, then we could see them aiming for the high of May 8th, at around 0.7025.
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