In overnight trading AUD/USD surged by almost 2%. This is the largest single-session up-move since the end of the previous up trend in January this year. As the chart above shows, this is highly significant given the amount of technical information it generates:
- The move breaks the 9 month downtrend that has seen the AUD/USD tumble from above 80 US cents to recent lows close to 70 US cents.
- The move completes a double bottom reversal pattern (and a "W" reversal pattern)
- The move also broke the resistance line of the "W" at 0.7150 (green line)
- The break upward follows divergence with the RSI at the bottom of the chart. While AUD/USD made a second low at a similar level (green arrows), the RSI made a clearly higher low.
- Despite the positive moves, the RSI around 65% is NOT indicating overbought.
These factors combined point to the beginning of a new uptrend for AUD/USD. Nothing is guaranteed in markets, and a fall below 0.7150 would wipe out this positive signal. Nonetheless, while AUD/USD remains above 0.7150 the technical outlook is positive, highlighting the potential for the pair to move significantly higher.