AUDUSD might have hit a major resistance around 0.7200 levels yesterday, carving a potential top over the short term. The currency is trading close to 0.7170 levels for now and bears might remain inclined to push lower from here.
AUDUSD probable wave counts are as follows: The rally from 0.5505 through 0.7200 levels might have unfolded as an impulse wave, sub-dividing into 5 waves (seen here from Wave 4). An impulse wave higher is ideally followed by a corrective wave lower.
If the above count holds well, AUDUSD should stay below 0.7200 and turn lower from here to produce a corrective wave towards 0.6500 levels at least. Also note that 0.6500/50 levels is the fibonacci 0.382 retracement of the previous rally.
Immediate support is seen through 0.7063 levels and a break below would confirm that a meaningful top might be in place at 0.7200 respectively. Further, AUDUSD would also break below its trend line support and enter into the sell zone.
Once the above structure unfolds, AUDUSD is expected to drop swiftly towards 0.6400 levels, which is previous Wave 4 support. It should also mark the termination of Wave A, within the proposed A-B-C corrective drop.
Traders might have booked profits on longs around 0.7200 mark yesterday. Most would prefer to stay flat until the retracement completed. Aggressive traders might be inclined to sell AUDUSD with a protective stop at 0.7230 levels and targets below 0.6500 for now.
Technical Analysis Team
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