Seemingly unstoppable, the Australian dollar has been on a winning streak recently. Yet the bulls wavered in their efforts not so long ago. Is it a sign that the tide is beginning to turn? Or, is it turning already?
We wrote on Monday that the recent AUD/USD upswing:
(…) brought the pair back above the two declining resistance lines, opening the way for further gains and to the resistance zone created by the 76.4% and 78.6% Fibonacci retracements.
Earlier today, the pair reached this area, and as the daily indicators haven’t flashed any sell signals, it increases the likelihood of further improvement and a test of the upper border of the rising green trend channel in the very near future.
The situation developed in line with the above, and the pair overcame the mentioned resistance line on Tuesday. The bulls however didn’t manage to keep all the ground gained, and a lower open followed earlier today. This means that a bearish gap has been created, invalidating the earlier breakout above the rising green trend channel.
This is certainly a bearish development that increases the probability of further deterioration in the coming days. But such price action will be more likely and reliable only if we see a daily close inside the channel coupled with the daily indicators generating their sell signals.
Should we see such price action, we’ll consider opening short positions.