Bearish Outlook For AUD/USD According To Weekly Chart

The AUD USD weekly trend turned down a couple of weeks ago when the currency pair crossed the swing bottom at 1.0597. After a few attempts on the daily chart to retrace the break, short-traders finally pressed the market enough to trigger a sharp break into an uptrending Gann angle from the October 2011 bottom at .9387.

This week’s low is 1.0335. This price is .0012 below the uptrending Gann angle at 1.0347. Oversold conditions or profit-taking may have led to the technical bounce after this price was tested, but the turnaround was hardly strong enough to form a closing price reversal bottom or even suggest that a change in trend to up was likely.
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The chart pattern suggests that there is plenty of room to the downside if 1.0347 can be taken out with conviction. This is a fancy way of saying “I’d like to see increasing volatility and rising volume on the breakout.” Even if the AUD USD cannot break this Gann angle on Friday, a close below 1.0387 will put the market on the bearish side of the uptrending angle which moves up by .004 next week.

With the main trend down and the market getting pressure from traders dumping higher yielding assets because of a weakening economy in China, the AUD USD seems poised to drop even further over the near-term. Based on the main range of .9387 to 1.0856, traders should start anticipating the possibility of a 50 percent or more retracement of this range. If short-sellers hit this market with fervor then expectations are for a possible break into 1.0121 to .9948. Price and time analysis suggests that a move to .9948 is possible by the week-ending April 20.

Even if today the AUD USD trades rangebound, traders should remember to watch for a close below 1.0387. If this occurs then be ready from the get-go next week because the market will be on the weakside of an important Gann angle and in a position to sell-off sharply.