It Could Be Make Or Break For The Aussie With Several Pairs Sitting At Support

AUD/USD remains within an established bearish channel on the daily chart. The September rally stalled around the 50% retracement level before rolling over, and prices are now interacting with the flash-crash low set early January. With the 20-day eMA capping the weekly high and Wednesday providing a bearish engulfing candle, the swing high could be in place at 0.6806. Yesterday’s inside bar shows compression is underway, which can be the prelude to range expansion.

• Bias remains bearish below 0.6806.
• Bears could take a break of Wednesday’s low as a sign the bearish trend is set to resume.
• Initial target would be around 0.6700 (round number) which is just above the YTD lows. A break beneath 0.6674 brings the lower channel into focus for bears.
• AUD/CHF is also worth keeping tabs on as the setup is quite similar.

AUD/JPY is consolidating above the June 2016 low and will likely track the direction of sentiment; so if indices and USD/JPY are to continue to rebound we could see USD/JPY rise in tandem, whereas if they turn lower, this FX barometer of risk could break through key support and bears take another crack at the year to date lows. Whilst a near-term bounce could be possible, we’d favour an eventual break lower due to the dominant bearish trend.

• The daily trend remains bearish below 74.50, although a minor rebound from current levels seems plausible.
• If prices rebound, a lower high beneath 74.50 could be a sign that momentum is trying to revert to the dominant trend.
• Bears could take a break beneath 72.50 as a sign prices are set to head lower.
• Monitor price action on S&P500 and USD/JPY to help assess the likely direction of AUD/JPY.

AUD/NZD has broken out of its latest channel, although the downside break is yet to compel. Wednesday’s bullish hammer respected support around 1.0700 and spoiled the potential double top pattern previously highlighted. Still, yesterday’s bearish candle spanned most of the hammer’s range and closed near the lows, so bulls are not out of the woods yet. That said, we note a potential bullish wedge forming on the four-hour chart with a small bullish divergence, so 1.0700 appears to be a key level going forward for bulls and bears.

• Bears could wait for a break below 1.7000 before considering shorts, with the lows around 1.0631/38 as a target
• Bulls could wait for a breakout from the wedge on the four-hour chart, using Thursday’s high as a initial target (the base of the wedge), followed by 1.0800 and the 1.0840 high.