Aussie Dollar follows the trend of all major currencies that are finding themselves losing ground against a marauding USD on boxing day. However, compared to the rest of its counterparts, the decline in AUD/USD is the strongest, highlighting the immense bearish pressure that AUD is currently under. Prices have fallen from a high of 0.8928 to a low of 0.8884 in the first 5 hours since market open without any significant bullish response, and is heading towards the soft support line just above 0.888. Despite the strong bearish pressure right now, the possibility of a small rebound from the above-mentioned support remains with Stochasic readings currently Oversold with Stoch/Signal lines converging – implying a possible bottoming of Stoch curve.
Should support level indeed hold, the obvious short-term bullish target would be the previous soft support turned resistance at 0.8908, but given the strong bearish bias right now, traders should not be surprised if prices does not manage to break 0.89 round figure and push back lower once more.
Weekly Chart is extremely bearish, and we could see a bearish continuation should 0.89 support is broken. Unfortunately, even though we are trading just under 0.89 right now, this is not enough to ascertain that the 0.89 support is broken as FX support/resistance lines tend to be “bands” rather than a singular line. Hence, more confirmation is needed especially since Stochastic readings are already within the Oversold region which actually favors are bullish push towards 0.93.
Similar to short-term chart’s analysis, it should be noted that it is entirely possible that price may not even be able to breach 0.91 round figure given the extreme bearish bias that is in play right now. Furthermore, fundamentals continue to support a weaker AUD moving forward based on lower rate outlook by RBA versus a stronger USD narrative in 2014 due to Fed tapering. Hence, do not be surprise if a rebound off 0.89 support fail to produce any significant bullish push and may instead result in stronger bearish response in the future as bears will certainly find higher prices a bargain to sell into.