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Market update: AUD/USD extends bearish reversal in fakeout fallout

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AUD/USD extends pullback after failing to clear overhead resistance around the 100-day simple moving average; the breakout that took place last week appears to have been a fakeout.


original-size.webpSource: Bloomberg

IG Analyst | Publication date: Thursday 09 November 2023 05:19

AUD/USD technical analysis

The Aussie embarked on a brief bull run against the US dollar at the outset of the month, bouncing from horizontal support, around the 0.6300 handle and breaking out on the topside. The initial rally gained strength late last week as the broader US dollar began to correct lower, following the FOMC decision and weaker-than-expected US data. However, prices hit a roadblock near the 100-day simple moving average on Monday, leading to a sharp reversal in the exchange rate (breakout looks like it was a fakeout).

AUD/USD’s retreat from technical resistance came in tandem with the Reserve Bank of Australia (RBA)'s monetary policy announcement a couple of days ago. The central bank raised interest rates by 25 basis points to 4.35%, but sounded non-committal about further tightening, signaling that the rate-hiking cycle might be drawing to a close. The RBA's cautious tone reinforced weakness in the Australian dollar, creating a more complex scenario for the antipodean currency.

Looking ahead, it is important to watch how prices behave around the 0.6400 mark, which coincides with the 50-day simple moving average. If this support zone crumbles, selling pressure could intensify in the near term, potentially leading to a drop towards 0.6350, the next floor in play. While AUD/USD may establish a base in this area during a retracement, a breakdown could open the door for a retest of this year's lows, located around the 0.6300 level.

In the event AUD/USD stabilizes and bounces back from its current position, overhead resistance can be seen at 0.6460. Successfully piloting above this technical barrier might attract new buyers into the market, creating the right conditions for an ascent towards 0.6510. To confirm the end of the downturn and signal a sustained recovery for the Australian dollar, it is essential to take out this ceiling. If this scenario plays out, the bulls may set their sights on the 200-day simple moving average.

AUD/USD technical chart


original-size.webpSource: TradingView




This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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    • Thanks for sharing THT! I highly doubt that gold will fall below the 1900 level, which is the lowest support level on the monthly time frame. Right now, the current pullback in gold is nothing but a FALSE MOVE to the downside which ALWAYS takes place before a REAL BREAKOUT. This FALSE MOVE can last no longer than 1-3 time units and is simply the REQUIRED movement of markets. Gold is setting up for a major sling-shot to the upside.
    • Had this on my chart (daily) for a long time Next watch for one of those 2 scenarios above unfolding THT
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