AUD/USD Forms Bullish Setup

AUD/USD established a bullish setup around its 50-day simple moving average (SMA), aiming to recover last week’s rapid downfall. Specifically, the pair has completed a large green candlestick following a doji candlestick earlier this week, pointing to fizzling selling tendencies.

Interestingly, the rebound in the price took place at the lower boundary of a bullish channel, raising optimism that the recovery has just started. Yet, with the support-turned-resistance trendline capping upside pressures around 0.6965 over the past few days, the current consolidation phase may continue for a bit longer, given the downward slope in the MACD.

The RSI is feeding some scepticism too, as it is struggling to overcome its 50 neutral mark. Should the bulls eliminate downside risks above the 20-day SMA and the 0.7000 round level, the pair could experience a quick rally towards August’s high of 0.7136, unless the 0.7065 barrier cools upside forces beforehand.

Then, a successful penetration higher could mark a new higher high somewhere between the 61.8% Fibonacci retracement of the 0.7660-0.6169 down leg at 0.7185 and the key ascending line is drawn from November 15. An extension through June’s peak of 0.7282 would further boost buying confidence.

Alternatively, a flip backwards could face limits between the 50- and 200-day SMAs at 0.6870 and 0.6800 respectively. Note that the long-term descending trendline from May 2021 is passing through this zone. Hence, a close lower could squeeze the pair directly to the 38.2% Fibonacci level of 0.6740.

The 0.6700 psychological number may come into consideration as well before the sell-off stretches to December’s low of 0.6628. In brief, AUDUSD seems to be preparing for its next bullish phase. A decisive close above 0.7000 could stimulate buying intentions.

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