AUD/USD price analysis: ending wedge offers limited buying
AUD/USD price analysis We look for rallies to be limited. Selling near the confluence zone targeting the wedge base offers a sound reward against risk setup.
Market highlights from the past week
Tuesday, May 19: Commodity currencies made sharp gains and the sharp retreat late in New York attracted cautious buying interest.
Wednesday, May 20: Risk appetite was more fragile on Thursday as US-China tensions continued to unsettle confidence and had a larger impact.
Thursday, May 21: Fitch confirmed the Australian AAA credit rating, but the outlook was changed to negative from stable due to the coronavirus impact on public finances.
Friday, May 22: The Australian dollar held steady during New York trading on Friday, despite a firm US dollar.
Monday, May 25: Fitch confirmed the Australian AAA credit rating, but the outlook was changed to negative from stable due to the coronavirus impact on public finances [Same entry as Thursday 21 - Ed]
AUD/USD price analysis
Let us have a look at the technical viewpoint.
Monthly: Posted a multiyear low of 0.5506 in March. We have seen a recovery of 20.16 per cent from base to peak. Resistance is seen at 0.6747. Technically, there is little to take away from this timeframe.
Weekly: Previous resistance at 0.6445 has been broken. What was resistance is now support.
Daily: Looks to be forming an ending wedge pattern. This formation has an eventual bias to break to the downside. Trend line resistance is seen at 0.6628; a break of trend line support and the measured move to 0.6253. It should be noted that trend line support at 0.6459 is close to the aforementioned weekly pivot and could take some breaking.
What is your sentiment on AUD/USD?
Intraday 4-hour: 261.8% extension is located at 0.6620 (from 0.6505-0.6549). This will often act as an exhaustion point.
Outlook: Although the immediate outlook is mildly bullish, we look for rallies to be limited. Selling near the confluence zone (0.6620-28) targeting the wedge base offers a sound reward against risk setup
Possible trade setup:
Action: Selling at 0.6620
Stop: 0.6650
Targets: 0.6460 and 0.6260
Potential return on risk to first target: R5.3 (reward 160 / risk 30)
Risk Warning - Your capital is at risk - Losses can exceed deposits
Trading spot foreign exchange and futures on margin carries a high level of risk and may not be suitable for all investors. You may lose all your capital. Past performance is not indicative of future results. The high degree of leverage can work against you as well as for you. Before deciding to invest in spot foreign exchange or futures you should carefully consider your investment objectives, level of experience, and risk appetite. If you are in any doubt about investment or the mechanics of such products, you should seek independent financial advice
