AUD/USD dips to 25-month low; looks oversold.
AUD/USD is losing its positive momentum that started the day, while it posted a fresh 25-month low of 0.7156 on Tuesday. The bearish trend could stay in place given that prices continue to fluctuate below the 20- and 40-simple moving averages (SMA) in the daily timeframe. However, some of the technical indicators are indicating that the pair is oversold and a possible upside retracement may be due.
The RSI indicator is flattening in the negative territory with no clear momentum, while the %K line of the stochastic oscillator is ready for a bullish crossover with the %D line in the oversold zone, giving a strong upside signal. Though, the MACD oscillator continues to strengthen its bearish bias below the trigger and zero lines.
Should the pair stretch south, Tuesday’s low of 0.7156 could provide immediate support before the pair touches the next significant psychological level of 0.7100. If the sell-off extends, attention could turn to the 0.7000 key handle, taken from the troughs on February 2016.
On the flip side, the 20-day SMA currently at 0.7280 may halt upside movement as it did several times over the last month. If traders continue to have a buying interest the next immediate support could come from the medium-term descending trend line, before being able to re-challenge the 23.6% Fibonacci retracement level of the down-leg from 0.8135 to 0.7156, near 0.7380.
In the medium-term picture, AUD/USD has been developing within a downtrend over the past seven months, after the pullback on the 32-month high of 0.8135.
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