AUD/USD received a bullish push this morning with prices trading from a low of 0.8904 to a high of 0.8951 during the first few hours of Asian trade. Once again, prices were moving mostly under technical influence this time round. USD did weakened slightly overnight due to UK parliament voting against any military action against Syria, decreasing the possibility of an upcoming war. However, AUD/USD continued to trade lower during the same period, hence this is not the reason why prices are trading higher. Looking at the news calendar, we have Private Sector Credit numbers being released during 9:30 SGT (9:30pm EDT) which was stronger than expected, this coincided with the strongest 1 hour bullish candle that we’ve seen today. But that is also not the key turning point for bulls, with the more important bullish bounce happening 1 hour prior. Hence this makes the news event rally seems more like a cheap excuse for technical bulls to buy into, especially since it coincide with the opening hour of most other Asian markets ex Japan. Fundamentals are merely a sideshow compared to technicals being the main star here.
With that in mind, the likelihood of AUD/USD breaking 0.895 decreases. The aforementioned level is the “true low” (closing levels of candle) of 22th Aug swing low, and the lows of 27th Aug. This happens to be the confluence of the Overhead Kumo which price has attempted to break just an hour ago. Furthermore, Stochastic readings appears to be peaking, suggesting that a peak and a bearish cycle is coming. That being said, as price managed to keep itself above the rising the trendline, we would need to see the rising trendline broken before we confirm that a bearish cycle is in play. This would most likely coincide with a stoch break of 80.0, providing more bearish conviction. 0.89 is the obvious bearish target, but there can be further bearish targets if we breaches 0.89 as the short-term bearish leg this week will be extended.
Looking at Daily Chart, the next immediate level beneath 0.89 would be 0.895, which is the 2013 low. It will be important that 0.895 is broken in order for continued bearish pressure, as Stochastic readings suggest that current bearish leg is oversold. If 0.895 holds, we may see another bullish rebound towards 0.90 for extended period before another bearish push happen.