Chart of the day AUDUSD breakout but risk minor pullback first before new potential upleg

In our previous article on the AUD/USD dated on 11 July 2017, the AUD/USD had failed to shape the expected short-term decline and rallied towards our alternative scenario target/resistance at 0.7670 and beyond it.  Click here for a recap.

Last Friday (14 July), it had staged a bullish breakout above the 0.7750 former significant range top in place since April 2016 high in line with general USD weakness reinforced by a weaker than expected U.S. retail sales for June (-0.2% m/m below 0.2% m/m consensus) and lacklustre inflation growth where June CPI ex food & energy came in at 1.6% y/y below consensus of 1.7% y/y.

Today’s key China economic data releases for June should be supportive for the bulls of AUD/US D where retail sales came in at 11% y/y that surpassed consensus of 10.6% y/y. In addition, industrial production recorded a growth of 7.6% y/y above consensus of 6.5% y/y. Overall Q2 GDP annualised growth stood at 6.9% which also beat expectations of 6.8% slightly. These latest set of economic data suggests that the recent deleverage policies embarked by the Chinese policy makers have not suck out the wind and create a hard landing in China.

Now, let us take a look at the latest technical elements of AUD/USD.

Short-term technical outlook on AUD/USD

(Click to enlarge charts)

Key technical elements

• The short-term bullish trend in place since 05 July 2017 minor swing low of 0.7570 remains intact.  Given its recent steep rally, it now faces the risk of a minor pull-back/consolidation at this juncture. Based on the Elliot Wave Principal/fractal analysis, last Friday’s pushed up is likely to have completed a minor degree impulsive wave 3 at the 0.7385 high and a corresponding minor degree wave 4 should occur next to retrace the recent rally with expected potential targets set at 0.7770/60 and 0.7750/40 (23.6%/38.2% Fibonacci retracement of the recent steep rally from 07 July 2017 minor swing low to last Fri, 14 July 2017 high) (see 1 hour chart).
• The aforementioned potential minor degree corrective wave 4 targets of 0.7770/7760 and 0.7750/7740 also confluences with the lower boundary of a short-term ascending channel from the 11 July 2017 swing low area and now pull-back support of the former significant range top/resistance of 0.7750  (see weekly & daily charts).
• The hourly Stochastic oscillator has continued to inch downwards into its oversold region and still has some room left before it reaches at extreme oversold level of 8%. These observations suggest that short-term downside momentum of price action remains intact for pair to see a deeper minor pull-back.
• The next significant short-term resistances stands at 0.7900 follow by 0.7960 which is defined by the pull-back resistance from April 2001 low, a Fibonacci projection cluster and the upper boundary of the aforementioned short-term ascending channel (see weekly & hourly charts).

Key levels (1 to 3 days)

Intermediate support: 0.7770/7760

Pivot (key support): 0.7750/7740

Resistances: 0.7900 & 0.7960

Next support: 0.7590/70

Conclusion

The short-term uptrend in place since 05 July 2017 low of 0.7570 remains intact for AUD/USD but it  now faces to risk of a minor pull-back first towards 0.7770/60 with a maximum limit set at the 0.7750/7740 short-term pivotal support. Thereafter, a new potential bullish impulsive upleg is likely to materialise to target the next resistance at 0.7900 and even 0.7960 next.

On the other hand, failure to hold above 0.7740 should negate the bullish tone to open up scope for a deeper corrective decline towards the next support at 0.7590/7570 (ascending trendline from 22 June 2017 low and the swing low areas of 05 July/10 July 2017).

Charts are from eSignal

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