Originally published by AxiTrader
The Australian dollar had an inside day yesterday - range inside the previous day's range - as a slow drift with waning risk appetite saw any attempt a trading up and through 0.7960 sustainably fail.
At 0.7934 this morning it's hardly weak. But as the US dollar gains traction, and looks to be at the start of a sustainable rally - now the euro has broken its 6-month uptrend line - the outlook for AUD/USD has darkened and it is biased lower.
That's doubly the case given recent price moves in iron ore, and copper which are bellwethers for Asia, China, global growth, and the Aussie dollar.
If I throw the US Dollar Index into the chart I shared yesterday you can clearly see the impact of the dollar on the Aussie along with the moves in these key commodity indicators.
So it's clear that if the US dollar is about to turn as I believe it is - even mildly - the Aussie dollar has the very downward bias I've highlighted above.
To the charts and a look at where that bias might suggest AUD/USD heads to. The easy money is on a simple retracement to the 38.2% Fibo level of the upmove at 0.7850. That's doubly the case given what looks like a double top above 81 cents.
The weekly charts suggest that level is support as well. And it's worth noting 78 cents was reasonable support previously on the way up. A break of this level would suggest a test of the break out zone around 0.7740/50.
Below that, things would get very interesting.
Looking shorter term at the 4-hour charts show the downward drift in prices since the high. More recently after the rally to 0.8104 last week at Fed time the Aussie has drifted to a low just above 79 cents Friday then rallied back to fail below the 38.2% retracement level of that move.
That makes Friday's low of 0.7907 the key support to watch. If it breaks it would suggest an extension to 0.7825. resistance is 0.7958 and then 0.7965/70 and 0.7990.
Have a great day's trading.