A short-term rally might take place for AUDUSD, as the pair formed a double bottom pattern on its 4-hour time frame. Price is still a few pips away from the neckline around the .8800 major psychological level but stochastic is indicating that there may be enough buying pressure left for a breakout.
MACD is also moving higher, indicating that bulls are in control of price action for now. An upside break from the neckline could yield as much as 250 pips in gains, which is the same height as the chart pattern. However, if the .8800 mark holds as resistance, the pair could move back to the bottom around .8550.
Take note that price is also finding resistance around the simple moving averages, as the 100 SMA is still moving below the 200 SMA. This suggests that the downtrend could still carry on and even push AUDUSD to new lows.
The recent rate cut by the PBoC has been received positively by the Australian dollar, as this could mean renewed demand for commodity exports and better global growth prospects. There are no event risks for this forex setup today, although risk sentiment might be a key driver of price action.
By Kate Curtis from Trader’s Way