Yesterday a TraderPlanet reader asked about the downtrend in Aussie/dollar (AUD/USD), so I looked into it and saw this market was likely setting up for a secondary reaction higher after a severe decline since April.
BIG MOVER
This morning the Aussie dollar futures contract is the biggest mover across the markets, up 1.4% at 0.9187. At miAnalysis my focus is the exchange traded products universe, so I’m monitoring FXA (CurrencyShares Australian Dollar).
I’ll take you through the bullish case for AUD/USD here since this is a good starting point whether you trade futures, currency options or ETPs.
BIG PICTURE
The weekly chart shows a doji candlestick (opening and closing prices are about the same) last week in a large demand zone; price finished hardly below the prior week’s close, a sign of diminished selling interest. This occurred amid a deep oversold reading in the fast RSI average.
DRILLING DOWN
On the daily chart, you can see what appears to be a small basing process since late June. This is supported by multiple bullish momentum divergences after deep oversold readings were reached.
TARGETS
Initial estimated upside potential is 0.93871 – the top of the demand zone. Secondary upside potential is chart resistance at 0.95799. Risk is limited to the recent lows.
