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(Price on 1st pane, Slow Stochastics on 2nd pane; horizontal support/resistance levels in yellow; uptrend lines in green; downtrend lines in red; chart patterns in white; 50-period simple moving average in light blue.)
Price action on AUD/USD, a daily chart of which is shown, has continued to respect a long-term uptrend support line (extending from March lows) despite the recent US dollar strengthening that has occurred against the major currencies.
Yet another bounce up off this support line occurred on Friday (10/02/2009), and price currently appears to be shooting to retest strong resistance at the 13-month high around 0.8850, which was reached late last week. Although this currency pair is still in a strong uptrend, it is currently entrenched within a clear consolidation.
A break of this consolidation could take one of two forms. An upside breakout above 0.8850 should confirm a continuation of the current uptrend, shooting first for resistance in the 0.8950 price region. The long-term upside target resides around the 0.9850 long-term high, which is a key 138.2% Fibonacci extension of the current uptrend.
A downside breakout of the current consolidation should break down below the noted uptrend support line, targeting first the key 0.8500 support/resistance price region. Incidentally, there is also some current bearish divergence between price and the Stochastics oscillator, as shown on the chart.
By James Chen, chief technical strategist, FXSolutions.com
