Price action on AUD/USD, a daily chart of which is shown, has displayed some significant US dollar strengthening in the past several trading days, much in the same manner as other dollar-based currency pairs. But the strong uptrend in AUD/USD, which has been firmly in place since early March, is currently still very much intact.
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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; 50-period simple moving average in light blue.)
The current bull market correction in this currency pair has thus far constituted a normal, minor retracement after overextending to the upside in a steep bullish run. That bullish run culminated in a 14-month high just above 0.9300. Any subsequent breakout above that high would confirm a continuation of the strong general uptrend and could potentially target the all-time high above 0.9800, which also happens to coincide with a 161.8% Fibonacci extension of the last bullish run.
To the downside, the highly significant uptrend support line extending from the March lows (which has thus far been respected at least four times) serves as strong dynamic support. Any substantial price breakdown below this trend line could place the current uptrend under a potential risk of trend change/reversal.
By James Chen, chief technical strategist, FX Solutions
