AUD/USD Shows “Dark Cloud Top”

07/12/2011 6:00 am EST

Focus: FOREX

A candlestick pattern on the charts continue to indicate that the AUD/USD currency pair has formed a short-term top, but in the absence of a compelling entry point, traders are left to watch and wait for now.

The AUD/USD currency pair continues to show signs of topping after posting fresh post-float record highs just over 1.1000 several weeks back. The latest corrective rally is therefore expected to be well capped below 1.0800 on a daily close basis, where the next lower top is sought out ahead of a fresh downside extension below 1.0390 and into the 1.0200’s.

Ultimately, only a daily close back above 1.0800 negates this view and gives reason for concern.

chart
Click to Enlarge

Taking a closer look at recent candles, AUD/USD rebounded from support at 1.0695—the 23.6% Fibonacci retracement level—but the bearish implications of near-term positioning established with the formation of a “dark cloud cover” candlestick pattern (seen below) at the beginning of last week remain intact absent a daily close above 1.0789.

A compelling entry point is lacking, however, and we will stand aside for now.

chart
Click to Enlarge

By the Staff at DailyFX.com

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