The Aussie Dollar (AUD/USD) just reached a 10-month high as the currency pair climbed above 0.8450. It has retraced a large part of the plunge occurred last year, when it fell by 39% in just 3 months, which is absolutely huge on the FX markets.
The extreme points of this large decline are points A and B on the weekly chart…
Several technical indications argue for a completion of the current trend just ahead, around 0.85. The current bullish move has been valid since early November last year. The Aussie bounced back from 0.60 (point B) to 0.8450 which is a 40% rise. Actually, if we look in more details, the real start of the current trend has been posted at mid-March this year (point C).
This confirms the timing of the correlation that has been in place for 2 years now between the US Dollar, the commodities markets and the stock markets. When the risk appetite rises, investors sell the US Dollar (therefore buy other currencies like the Aussie) and buy commodities and stocks. Oppositely, they buy back the Greenback and sell the commodities and stocks when uncertainty and risk aversion appear.
Technically, the weekly indicators are really high now and don’t have so much more potential upside. This suggests a peak and eventually a consolidation or a correction. The MACD is well above its level when the price was at 0.9850 last year. The RSI is currently just below the overbought area.
On the daily chart, there is something more…
A bearish divergence clearly appears through several oscillators. You may know that a bearish divergence is created when an oscillator does not confirm a new high posted by the price action. Typically it means you’re in the very last part if the rally. The trend completion is usually close. Here the Chande Momentum Oscillator illustrates this chartist configuration.
There is a resistance line at 0.85. This level corresponds to a previous low (point D posted in late august last year) that become a new high (point E posted in last September). This is clearly the target before a probable correction towards 0.81 in a first time.
