AUD/USD price analysis: correcting higher from 261.8 per cent

AUD/USD price analysis: although the anticipated move higher is regarded as corrective, it does offer ample reward against risk today.

Market highlights from the last week

Friday 28 August: risk appetite held steady amid expectations of low interest rates.

Monday 31 August: the Reserve Bank of Australia held interest rates at 0.25 per cent following the latest policy meeting, in line with consensus forecasts.

Tuesday 1 September: Australian GDP declined 7 per cent for the second quarter compared with expectations of a 6 per cent decline, confirming the first recession for over 30 years.

Wednesday 2 August: US ADP jobs data was weaker than expected while Federal Reserve rhetoric remained dovish.

Thursday 3 August: the Australian dollar was initially undermined by a stronger US dollar on Thursday and losses then accelerated as risk appetite deteriorated sharply and equity markets declined.

AUD/USD price analysis

Let us 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 0.6797 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). Are we seeing the completion of a fifth wave (Elliott Wave)? This would then mean a corrective three-wave pattern lower.

AUD/USD price analysis

Daily: an Evening Doji Star formation has been posted at the high. This offers a medium bearish bias.

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Intraday one-hour: we have a 261.8 per cent extension level located at 0.7272 (from 0.7413-0.7360). We have our technical support at 0.7263. We are seeing a move to the upside in morning trade.

AUD/USD price analysis

Outlook: although the anticipated move higher is regarded as corrective, it does offer ample reward against risk today.

Possible trade setup

Action: buying at the market (currently 0.7267)

Stop: 0.7245 (below the swing low)

Target: 0.7340 (previous support)

Potential return on risk to first target:  R3.3 (reward 73 / risk 22)

Australian Dollar / US Dollar
Daily change
0.66837
Low: 0.66464
High: 0.67413

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