AUD/USD Price Analysis: Uptrend bias continues
- AUD/USD has continued trending higher and almost retested the highs of May.
- A clear break above 0.6714 would confirm a continuation of the short-term uptrend.
- Only a break below the red trendline would bring into question the dominant uptrend.
AUD/USD was pulling back but it found support and rallied back up to within a few pips of the May 16 high at 0.6714.
The Aussie is in a short-term uptrend indicated by the rising peaks and troughs on the four-hour chart since the April 19 lows. Given the old saying that “the trend is your friend” the odds favor an extension of the uptrend.
A break above the May 16 high will create a higher high and confirm an extension of the short-term uptrend.
AUD/USD 4-hour Chart
The next target to the upside would be 0.6728, a previous high, followed by 0.6870, an old resistance level.
AUD/USD achieved the target for the Measured Move pattern it formed from the April 19 lows at the May 16 highs of the month. Measured moves are zig-zag like patterns composed of three waves, usually labeled A, B and C. The general expectation is that wave C will reach either the same length as A (or a Fibonacci ratio of A) which it succeeded in doing when it peaked at 0.6714.
The Relative Strength Index (RSI) is much lower at the May 20 high compared to the May 16 high. The difference is a soft divergence but because price has not made a higher high on May 20 yet, it cannot be counted as pure divergence. Nevertheless, it is a mildly bullish sign that suggests an increased possibility of a pull back.
It would require a clear break below the 0.6649 May 17 lows to indicate the trend was weakening.
A decisive break below the red trendline would be a much more bearish sign which could denote a change of the short-term trend.
Decisive would be characterized as a break that was accompanied by a long red candle that closed near its low or three red candles in a row that broke through the trendline.
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