Mon, Mar 27, 2023 @ 17:04 GMT
HomeContributorsFundamental AnalysisCould The AUD Be Readying To Test December's Lows?

Could The AUD Be Readying To Test December’s Lows?

Key Points:

  • Double top formation could see a large decline over the coming weeks.
  • Parabolic SAR remains highly bearish.
  • The neckline of the pattern is now very much in sight.

The Aussie Dollar seems to have finally shed its bullishness and is now making a beeline for a crucial level of indication which might result in a substantial slide over the coming weeks. Specifically, if it breaks through the 0.7490 level, a developing chart pattern will likely be confirmed which should result in a decline back to the December lows.

More specifically, over the past 3 months we have seen what is now clearly a double top pattern form up. This structure has largely respected the overarching bearish trend line and, now that the AUD has closed below the 100 day EMA, this bearish sentiment should come back with a vengeance. As a result, the neckline of the double top is now firmly in sight which could mean further loses are now on the way.

Such a return of long-term bearishness would mirror the consensus being reached by a number of technical instruments. Namely, the parabolic SAR is steeply bearish and in practically no danger of having its bias inverted within the next few weeks. Similarly, the EMA bias is indicating that losses should extend moving ahead, especially now that the pair is below the 100 day average. Finally, we can also look to the MACD oscillator for some guidance as the recent signal line crossover would typically indicate that a downtrend is still firmly in place.

All things considered, we expect to see the neckline around the 0.7490 handle to not only be challenged but also be broken within a week or so. When this happens, selling pressure could mount significantly which may not truly abate until the AUDUSD moves all the way back to the 0.7158 mark. Downside risk should be capped around this level given that it has been a very robust support for the pair over the past year or so. However, we could also have some difficulty with the 0.7325 level which has also proven to be a solid zone of support as well.

Ultimately, this forecast may run into a bit of interference if the Australian and US fundamentals continue to post mixed results. However, given the widely held expectations of successive US rate hikes and the broadly bearish technical bias, is not too much of a stretch to envision a return to the lows seen only a few month ago. As a result, keep an eye on the neckline as over the coming sessions as it could be the first key support to yield in a rather impressive trance of losses.

Blackwell Global
Blackwell Global
The report provided by Blackwell Global Investments Limited ("Blackwell Global") is meant for informative reading and should not be relied upon as a substitute for extensive independent research . The information and opinions presented do not take into account any particular individual's investment objectives, financial situation, or needs, and hence does not constitute as an advice or a recommendation with respect to any investment product. All investors should seek advice from certified financial advisors based on their unique situation before making any investment decisions and should tailor the trade size and leverage of their trading to their personal risk appetite.

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