AUD/USD edged higher to 0.7339 last week but retreated since then. Initial bias stays neutral this week for some more consolidations first. At this point, we’re favoring the bullish case that consolidation pattern from 0.7413 has completed with three waves to 0.6991. On the upside, break of 0.7339 will target at test on 0.7413 high first. Firm break there will resume larger rally from 0.5506. Nevertheless, on the downside, break of 0.7221 minor support would likely extend the consolidation pattern from 0.7413 with another falling leg.
In the bigger picture, while rebound from 0.5506 was strong, there is not enough evidence to confirm bullish trend reversal yet. That is, it could be just a correction inside the long term down trend. Sustained trading back below 55 week EMA (now at 0.6969) will favor the bearish case and argue that the rebound has completed. Focus will be turned back to 0.5506 low. On the upside, break of 0.7413 will extend the rise from 0.5506 to 38.2% retracement of 1.1079 (2011 high) to 0.5506 (2020 low) at 0.7635.
In the longer term picture, bullish convergence condition in monthly MACD is a condition for long term bullish reversal. Yet, AUD/USD struggled to sustain above 55 month EMA (now at 0.7302). It’s also limited below 38.2% retracement of 1.1079 (2011 high) to 0.5506 (2020 low) at 0.7635. Hence, there is not enough evidence for reversal yet. Down trend from 1.1079 could still extend through 0.5506 at a later stage.
