The AUD/USD pulled back in slow holiday trade last week, but the longer-term uptrend off the late January low remains intact. A few weeks ago, we discussed two clear patterns on the daily chart that both projected a target at the .9500 handle (see “AUD/USD: Clear Sailing to .9500?” for more). Rates have yet to reach that level, but the technical picture remains generally constructive; the biggest near-term question mark comes from the Aussie’s fundamental backdrop.
Tackling the technicals first, the AUD/USD appears to have broken back above last week’s falling wedge pattern. Though it’s created from a series of lower lows and lower highs, a falling wedge is actually a bullish pattern as it shows declining selling momentum on each additional thrust lower. Last week’s drop only represented a 23.6% Fibonacci retracement of the previous rally, showing that buyers remain in control of trade from a longer-term perspective.
At the same time, the secondary indicators are also supportive of further gains. The MACD has crossed back above its signal line and is nearing the key “0” level, showing a clear shift toward bullish momentum. Meanwhile, the RSI managed to hold above the 40 area throughout last week’s dip; as long as the indicator continues find a floor in that area, the longer-term uptrend remains intact.