AUD / USD traded higher on Friday, after reaching support near the 0.7253 area overnight. The pair has been in a slide mode since last Tuesday, but overall remains above the uptrend line drawn from the June 15th low. Thus, we would view the latest setback as a corrective phase, and we would view the short-term outlook as still positive.
Having said that, confirmation on the current rebound and expanding above the 0.7300 barrier would allow us to assert this assumption, which is marked as resistance from last Wednesday's low. Such a move could prompt bulls to aim for Monday's low, around 0.7340, where another breakout could set the stage for extensions towards the 0.7415 area, marked by last Tuesday's high.
We see that the RSI, although below the 50, has rebounded from near its 30 line, while the MACD, although below its zero and trigger lines, is also showing signs of a dip. Both indicators detect a slowdown in the rate of decline and suggest that the rate may soon start to gain momentum. All of this is consistent with the concept of subsequent recovery.
Bearish alternative scenario, we would need to see a steep drop below 0.7205, marked by the August 24 indoor swing high which could allow a dip to the 0.7140 area, which provided strong support on August 20 and 21. . If the AUD / USD stays below the bullish trendline, we will have the possibility for another bearish step to reoccur which could result in the 0.7140 hurdle being breached. The Bears could push the pair to the August 12 low, 0.7110, or the August 3 low, to the 0.7075 level.
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