The Australian dollar sprung to life again last week against its U.S. counterpart, rallying more than 300 pips from its lows and managing to close near its week high.
The result of this was a very bullish looking marabuzo candle on the weekly chart, as well as the pair hitting the highest level since August. On top of this, it closed above the 55-week simple moving average and the channel it has traded within for the last seven months, which itself was a bottoming pattern – an early signal that things were starting to look more bullish.
What can often happen after such a strong week is we start to see some profit taking – leading to consolidation – or even a correction. As it stands, it looks like we’re seeing the former, but this doesn’t change the fact that the pair now looks very bullish.
In fact, we’ve already seen it find support around 0.74 before it’s had a chance to test a previous key resistance level around 0.7380. It has rallied off these lows and appears to be attempting a break above the flag – a bullish continuation pattern.
If the rally does continue, the pair could run into further resistance around 0.75, which provided resistance back in July when the pair previously traded at this level.
That said, I think this could just be a temporary resistance level for the pair and the next major test could come around 0.7530-0.76, which was a major support zone between March and June last year.