The AUDUSD has staged a steady recovery since reaching 0.6894 last Thursday, its lowest level since early July. There have been modest corrections along the way, but buyers have continued to push higher. Today, the AUD is the strongest of the major currencies against the greenback.
However, that rally has reached an important technical hurdle.
The price extended to its 100-day moving average at 0.70332, with the session high reaching 0.7036 before sellers leaned against that level.
The buck stopped there.
The price has since rotated lower to 0.70185, taking it below the 38.2% retracement of the decline from the September high at 0.7025, and below the lower boundary of a swing area at 0.7020. That gives sellers an opening, but they still need to build on it.
For traders looking for a high to be in place, the downside roadmap is straightforward:
Stay below the 100-day moving average at 0.70332. That keeps the rejection intact and gives sellers a level against which to define their risk.
Build momentum below 0.7025–0.7020. The break has occurred. Now sellers need to keep the price below that area and extend lower.
Break below last week’s high at 0.70125. Moving back below that former breakout level would weaken the buyers’ case further.
If sellers can work through those steps, the next downside target comes at the 0.6989–0.6994 swing area, followed by the 100- and 200-hour moving averages below.
Conversely, a move back above the 100-day moving average at 0.70332, followed by an ability to stay above it, would put buyers back in position to challenge the 200-day moving average at 0.7047. Above that, the next target is the 50% midpoint of the decline from the September high at 0.70654.
The educational takeaway is that reaching resistance and confirming a reversal are two different steps. The 100-day moving average has attracted sellers, but the rejection alone does not establish a lasting high. Sellers need follow-through below the nearby retracement and swing levels. Without that progress, this could still be a correction within the rebound from last week’s low.
In the video above, I take a look at the AUDUSD’s rejection at the 100-day moving average, the levels sellers need to break to gain more control, and what would put buyers back in charge.
This article was written by Greg Michalowski at investinglive.com.
