Forex Strategy: AUD/USD Breakout Looms As Prices Consolidate

Talking Points

• AUD/USD Technical Strategy: pending short
• Bearish reversal signal emerges on daily but fails to receive confirmation
• Break below 0.9210 may open declines to 0.9130

The AUD/USD is poised for a breakout as prices are compressed between 0.9210 and 0.9300. While a Shooting Star formation had hinted at a potential reversal, it failed to receive confirmation from a successive down day, which casts doubt over a possible correction. However, at the same time several short trading days and a Doji candlestick suggests that the bulls are also hesitant. This leaves the potential for a fundamental catalyst to cause one side to back down and a cause a breakout.

Such a catalyst happens to be on the horizon - the monthly US NFPreport due in the coming hours is likely to spark significant volatility for the Aussie. Details available on the economic calendar here.

AUD/USD: Prices Consolidate As Breakout Looms

Daily Chart - Created Using FXCM Marketscope 2.0

Similarly a look at intraday price action suggests that the potential for downside follow-through is limited at this stage. If the bears manage to take hold of prices and push the AUD/USD below support at 0.9210, it may open up further falls back towards the 0.9130 mark.

AUD/USD: Bears Knocking On 0.9210/3

4 Hour Chart - Created Using FXCM Marketscope 2.0

By David de Ferranti, Market Analyst, FXCM

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