AUDUSD – Double Bottom Sparks Possible Correction

The sell-off in the Australian dollar against its US counterpart has been going on for some time now and over the last 12 months in particular, it has been declining at a fairly steady rate. The descending channel that has formed in this time may be about to give the signal that a correction has begun.

The pair rallied strongly last week, benefiting greatly from the recovery in commodities, and may have gathered enough momentum to take it through the channel resistance and enter a more prolonged correction.


Last week’s rally has taken the pair back to the top of the channel and the weekly candle alone would suggest there’s plenty of momentum in the move, putting the channel resistance at risk.

Adding to this though is that the neckline of the double bottom – formed since 24 August – has been broken, which in itself is very bullish and suggests a strong push to the upside could follow.


Even taking into consideration the two possible positions of the neckline – be it in line with 18 September highs or consistent with the two bottoms which are not flat – there has been a daily and weekly close above. The latter was even retested today and provided sufficient support.

The break of the channel resistance would now provide further confirmation of the more prolonged move to the upside and based on the size of the double bottom, this could take it back to 0.7620-0.7640 (orange and red lines on the chart).

Here it would roughly coincide with prior support and depending on how long the move takes, the 233-day simple moving average.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam