AUDUSD has pulled back sharply after breaking below a rising trend line that had been guiding the rally since early April, and price is now heading toward a former resistance zone that could turn into a support floor.
The pair has been sliding from the swing high at 0.7275, and the Fibonacci retracement tool drawn from the April low highlights where buyers could be waiting to return.
The 38.2% Fib sits at 0.7108 as the first area of interest, with the 50% level at 0.7057 just below. A deeper pullback could bring the 61.8% Fib at 0.7006 into play, which lines up closely with a key horizontal support zone and the 200 SMA dynamic inflection point, making it a particularly compelling line in the sand for bulls.
If any of the Fib levels or the 0.7000 psychological handle manage to hold as support, AUD/USD could stage a recovery toward the swing high at 0.72749 or higher.
The 100 SMA has crossed below the 200 SMA, suggesting that the path of least resistance may be shifting to the downside or that the correction could have more room to run. However, if the Fib levels and former resistance zone manage to attract buyers, the crossover could prove to be a fakeout rather than a trend reversal signal.
Stochastic has plunged deep into the oversold region, reflecting exhaustion among sellers and raising the odds of a bounce from current levels. The oscillator appears to be turning up from that area, hinting that buyers could be starting to take back control.
RSI has also dropped sharply toward its oversold zone and is testing its most depressed levels since the broader rally began. This kind of reading has previously coincided with meaningful bounces for the pair, so a reversal signal here could carry some weight.
AUDUSD could take cues from the FOMC meeting minutes midweek then Australia’s jobs report due on Thursday, as policy divergence and overall risk sentiment could be the main drivers of the pair’s price action.
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