AUD/USD price-analysis: looking for a correction higher
AUD/USD price-analysis: with signals for sentiment at oversold extremes, we look for a correction to the upside
Market highlights from the past week
Monday September 21: risk appetite deteriorated sharply on Monday as fears over political and economic risks increased, especially with concerns over global coronavirus developments.
Tuesday September 22: the Australian dollar briefly recovered ground on Tuesday, but gains faltered quickly and there was renewed selling in New York as the US currency gained fresh traction. In this environment, AUD/USD declined to lows near three-week lows, near 0.7150.
Wednesday September 23: the US dollar secured renewed defensive demand and short positions were cut with the dollar index at two-month highs.
Thursday September 24: the Australian dollar remained under pressure during much of Thursday amid the firm US dollar and fragile risk appetite. AUD/USD dipped to lows just below 0.7020.
Friday September 25: the US dollar gained net support on Friday, especially with unease over European developments, with a slight retreat from two-month highs on Monday
AUD/USD price-analysis:
Let’s have a look at the technical viewpoint:
Monthly: traded to a multi-year low of 0.5506 in March. The trend of lower lows at 0.6795 has been clearly broken. What was resistance is now support.
Weekly: We have a 261.8 per cent extension level at 0.7393 (from 0.5506-0.6220). We have completed a 5-wave sequence. According to Elliott Wave this should mean a three-wave correction lower is the next pattern.
What is your sentiment on AUD/USD?
Daily: previous resistance from the December 31, 2019, is located at 0.7032. What was resistance is now support.
Possible trade set-up:
Action: buying at the market (currently 0.7040)
Stop: 0.7000
Target: 0.7191 (previous swing low)
Potential return on risk to first target: R3.7 (reward 151 / risk 40)
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