Nick Nasad
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Where Does AUD/USD Retrace End?

In our last look of the AUD/USD - after the RBA rate decision - we had anticipated a potential double top pattern. While we got some reaction from the 0.9000 level and managed to break through our short term speed-line (red trendline) the retrace was only really able to test our initial target, 0.8920. After that the pair extended its gains from earlier in the week and even managed to overtake the 0.90 handle (along with the 1-hour 200EMAs (I use both the 200 SMA - in black - and the 200 EMA - in gray - on my charts because I like to know where both are in case they are radically different).

What we have then is a 3-session upward channel along and with AUD shorts getting squeezed there is probably further scope for the pair to head higher.

I'm still of the fundamental bias that the general direction for this pair is down. The poor economic data from Australia caused the RBA to lower interest rates to record lows and the weak macro releases continue in the form of a jobs report for July that showed the economy shedding 10.2K jobs when forecasts called for a 6.2K gain.

Still, the techs and momentum are now in charge (and broad USD weakness) so we have to see where the pair heads to before we can try and fade any rallies, preferably with something resembling nice topping action to help us along.

The levels of support I'll be watching then are 0.9040 (currently being tested), then the 50% fib retracement of the swing from 0.9316 to 0.8845 at 0.9080, and beyond that the "holy grail" of proper retracements the 61.8% fib at 0.9137 which coincides nicely with and old level of support that was cracked. Add a bearish divergence around those levels and it will be time to start thinking about shorting this pair again.

- Nick