AUD/USD traders are most likely in for some tough swings over the next week or so. The currency has hit strong Support, and indicators are in the oversold region. Is it time for the Bulls to regain control? In a perfect world, it would seem so, but this is the AUD/USD. Currencies trend, and often lagging indicators are useful in finding market turns. However, the Aussie tends to drag most of the indicators out when reaching oversold or overbought territory. Fundamentally the recent market slide may be mostly influenced by the bounce in the USD component of this currency cross. Technically and fundamentally you are most likely in for a choppy trade over the next couple of weeks as Bulls and Bears try to get a grasp on direction.
The recent return to USD strength is what has helped to drive the AUD/USD into lower territory. Currently, it looks as though this has been just a correction, and a bit of consolidation is now what you will have to contend with. This sets the AUD/USD up for the swing traders as follow through to the upside and downside is not expected to be extreme over the short run. U.S. CPI will be important this week as the economics of things play into forecasts. Global equities have been under pressure as of late, and this has helped prop up the USD strength. Continued pressure in the major indexes around the globe may add fuel to the recent sell-off in the AUD/USD. However, a rebound in equities may help to give currency Bulls a shot at rebounding from the recent break.
On the technical side of things, the market is set for a short-term challenge of the 0.7890 Resistance level. Volatility has been rising, and momentum may be on the side of the Bulls since the overall trend is positive. The 0.7983 level is the extended upside target. Because the fundamental outlook is a bit hazy it would be surprising to see any positive move exceed the 0.7983 level. A strong rebound in the Equity markets would be necessary to fuel any major Bullish run back towards the High set a couple of weeks ago.
Trading below 0.7815 will be very edgy. Bearish pressure will be flirting with a test of the 0.7755-0.7741 Support band. Be careful in this area. Trading in this range is a negative sign that the Bears are not through hitting newer move lows. The 0.7634 level is the extended downside target. If the AUD/USD continues to fall back on Support then the longer term Bullish trend will be on hold, but it will not mean a Bear market has begun. Rather it sets up the AUD/USD for consolidation, and more swing trader opportunities as the Bears and Bulls wrestle around to set a range.