Bearish scenarios sub 0.60 could be in store early week

5 thg 4, 2020

AUD/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited though serves as guidance to potential longer-term moves)

Overwhelmed by the effects of the coronavirus pandemic, the month of March scored seventeen-year lows at 0.5506 ahead of demand pencilled in from 0.5219/0.5426, before staging an impressive recovery. The recovery move reclaimed more than 60% of the month’s losses, consequently drawing the pair to within reasonably close proximity of supply fixed at 0.7029/0.6664, intersecting with a long-term trendline resistance (1.0582).

April, however, currently trades lower by 2.40%.

With reference to the market’s primary trend, a downtrend has been present since mid-2011.

Daily timeframe:

Unable to grasp nearby demand-turned supply at 0.6330/0.6245, which holds a 50.0% retracement band at 0.6271, price turned lower in the earlier stages of the week. Wednesday struck the top edge of a demand base at 0.5926/0.6062 and produced a clear-cut indecision candle Thursday. Friday, nonetheless, saw sellers strengthen their grip and tunnel further into 0.5926/0.6062, registering a fourth successive bearish close.

Continued downside here could pave the way lower towards demand at 0.5710/0.5767, as well as nearby support from 0.5563.

With reference to the RSI indicator, the value is struggling to make headway north of 30.00, fading levels beneath 50.00.

H4 timeframe:

A moderate supply-turned demand area at 0.6029/0.5964 welcomed price action in the later stages of the week, holding by way of an ‘indecision’ candle formation Thursday and pencilling in an ‘inverted hammer’ candlestick pattern late Friday – interpreted as a bullish signal.

The foundation for a climb to 0.6314/0.6235 is still potentially in the pipeline. With limited active supply visible to the left of price, 0.6314/0.6235 is in sight, comprised of a support-turned resistance at 0.6314, a 161.8% Fib ext. level at 0.6273 and a 61.8% Fib retracement at 0.6235 (yellow oval).

A break beneath 0.6029/0.5964, on the other hand, has demand at 0.5737/0.5825 on the radar.

H1 timeframe:

Friday observed intraday flow welcome a 161.8% Fib ext. level at 0.5989 mid-way through London hours, likely running sell-stop liquidity south of the widely watched 0.60 figure. The greenback maintained a strong upside presence in spite of disappointing US jobs data, capping upside attempts from 0.60.

Additional technical findings have the candles compressing within a descending channel configuration between 0.6185 and 0.6006. Lack of support off 0.60 will shine the spotlight on a robust demand base coming in at 0.5906/0.5934, enveloped by the 0.59 RN and 161.8% Fib ext. level at 0.5940.

With reference to the RSI indicator we are coming off lows out of oversold terrain, though the value remains sluggish.

Structures of Interest:

Longer term:

Monthly price exhibits scope for a run lower over the coming weeks; however, a retest at supply from 0.7029/0.6664 is certainly not out of the question. Daily flow is struggling to entice bids within demand at 0.5926/0.6062, with the possibility of a break lower occurring this week.

Shorter term:

H4 and H1 timeframes echo a somewhat conflicting tone right now. H1 emphasises weakness off 0.60, potentially attracting the eyes of sellers, while H4, although deep within a supply-turned demand at 0.6029/0.5964, produced a bullish candlestick signal.

Ultimately, though, sellers appear to have the upper hand at the moment. There’s little suggesting the bulls want to take things higher, aside from the H4 bullish candlestick signal. As such, bearish scenarios sub 0.60 could be in store early week.