Australian Dollar Forecast: AUD/USD Price Eyes a Test of Neckline Support

Australian Dollar Forecast:  AUD/USD Price Eyes a Test of Neckline Support

Last week, bears exited their trade allowing AUD/USD to rally. Will bulls take advantage of this opportunity or will bears come back?

AUD/USD Technical Outlook

· Bearish signals on AUD/USD price chart

· Neutral outlook while above 0.7235

Bears Pullback

On October 1, AUD/USD hit an over one week high at 0.7207 then retreated after. Ultimately, a weekly candlestick closed in the green with a 2.0% gain. Alongside that, the Relative Strength Index (RSI) failed to cross above 50 indicating that downtrend momentum was still in place.

AUD/USD Daily Price Chart (July 24 – October 6, 2020)


Chart source, Webtrader, Capex.com

On September 25, AUD/USD rebounded from the low end of the current trading zone 0.7018 – 0.7235 and pointed higher eyeing a test of the high end. However, the price failed last week to close above the 50-day average highlighting that bearish sentiment was still intact. Hence, the price could be on the way to re-test the low end of the trading zone.

A daily close below the low end of the zone at 0.7018 could encourage bears to press AUD/USD towards the monthly support at 0.6772 (February 2020 high).

On the other hand, a daily close above the high end of the zone at 0.7235 may cause a rally towards the weekly resistance at 0.7327 (May 2017 low).

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AUD/USD Four Hour Price Chart (September 25 – October 6, 2020)

Chart source, Webtrader, Capex.com

On October 2, AUD/USD traded below the bullish trendline support originated from the September 25 low at 0.7004. The price rebounded twice from the trendline resistance highlighting the bull’s weakness.

In conclusion, while bearish momentum is weak, a violation of the neckline of the double top pattern located at 0.7129 could accelerate the downtrend move. Therefore, a break below 0.7097 may send the pair towards 0.7030, while a break above 0.7257 could trigger a rally towards 0.7308. As such, the support and resistance levels underlined on the chart should be considered.

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