AUDUSD Analysis May 2015 (D,W)
Created on Friday, 01 May 2015 02:08
Written by Austin Galt
The belated bear rally has finally kicked off so let’s review the technicals using the daily and weekly charts.
AUDUSD DAILY CHART
We can see what appears to be a small head and shoulders bottom which is a valid pattern for low.
Price has subsequently rallied above the previous swing high level denoted by the horizontal line. This set up a higher high which looks in place so now we just await a higher low and this bear rally can really assert control.
The PSAR indicator still has a bullish bias with the dots underneath price so it is still possible for price to trade a touch higher before correcting.
The Bollinger Bands show the recent high was well above the upper band which is a common feature of tops.
The RSI shows a new high which indicates strength. The final bear rally high should be accompanied by at least one bearish divergence. It is also not out of the question for price to trade marginally higher now and put in a little bearish divergence before trading back down to put in a higher low.
The Stochastic indicator has just made a bearish crossover so a correction looks on the cards.
The MACD indicator shows the averages have diverged quite a lot so some regression to the mean looks in order. A correction by price would do the trick.
How low is price likely to correct to?
I have added Fibonacci retracement levels of the recent move up and the first retracement in a new bull trend is often deep so I favour a move back to at least the 76.4% level at 76.61c and even as low as the 88.6% level at 75.95c. Keep in mind that it is possible for price to trade higher now before correcting but if that happens then I expect the new high to be only marginally higher which won’t overly affect this analysis.
I have also drawn a Fibonacci Fan and am looking for price to come back to the 88.6% angle or thereabouts.
Let’s move on to the weekly chart.
AUDUSD WEEKLY CHART
We can see the move up this week has busted the dots of the PSAR indicator so a bullish bias is now in force here. Ad often happens after this event, price comes back down to test the support which is represented by the dots that are now underneath price.
The RSI is looking strong after showing a quintuple bullish divergence. I expect the final bear rally high to be accompanied by at least one bearish divergence.
The Stochastic indicator showed a quadruple bullish divergence at the recent low and is now trending up bullishly.
The MACD indicator showed a triple bullish divergence at the recent low and is also trending up and looking bullish.
I still expect a massive bear rally to play out which will challenge the July 2014 high which is denoted by the horizontal line and stands at 95.04.
I have added Fibonacci retracement levels of the move down from October 2013 high to recent low and the July 2014 high is right at the 88.6% level which stands at 95.03c. A top here would set up a bearish double top with the trend.
I have drawn a Fibonacci Fan from the October 2013 high to recent low and I am looking for the 88.6% angle to provide solid resistance.
If price doesn’t rally as high as my expectations then the 76.4% level at 92.31c and the 76.4% angle should be the minimum target.
Once the rally high is in place I expect the overall downtrend to continue which will see price bust to new yearly lows. But let’s enjoy this bear rally first!