AUD/USD fundamentals (declining terms of Australian trade, RBA intentions, USD strength) point to further downside over 2014. However, the technical picture is suggesting a corrective rally in the short term.
The clear breach of down trend lines is accompanied by a MACD cross and a widening gap, indicating strengthening upward momentum. If this is a corrective rally, how high can it go?
Of course, the answer is “as far as it does”. However, a retracement analysis gives two key resistance levels. The 38.2% level co-incides with resistance around 0.9080, and a 61.8% retracement sits just above resistance around 0.9285. This offers something for everyone.
Traders with a shorty term focus could be buying at current levels, with a target just below 0.9080 and a stop loss below 0.8900. Swing traders may wait for a breach of yesterday’s high at 0.8980, with a tight stop loss and a target at either 0.9210 or 0.9335.