AUD/USD Ready for Retracement

06/03/2009 12:01 am EST

Focus: FOREX

James Chen

Chief Technical Strategist, FX Solutions

(Price on 1st pane, Slow Stochastics on 2nd pane; horizontal support/resistance levels in yellow; uptrend lines in green; downtrend lines in red; 50-period simple moving average in light blue.)

After breaking out cleanly above the 0.8000 psychological resistance barrier in the beginning of the week, continued dollar weakening has pushed AUD/USD, a daily chart of which is shown, to approach the next major resistance target in the 0.8260 price region.

The current steep and accelerated uptrend is showing little sign of abating, but with all technical indications showing that the pair is extremely overbought, a retracement or consolidation should be imminent. Strong downside support in this event now resides around the key 0.8000 region, with equally strong dynamic support residing around the uptrend support line extending from the late-April touch of 0.7000.

Any strong breakout above 0.8260 should target key resistance in the 0.8500 price region.

By James Chen, Chief Technical Analyst, FX Solutions

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