AUDUSD has recently broken below the .8700 major psychological support zone and dipped to the .8550 area before making a pullback. This correction might last until the broken support area and the Fibonacci retracement levels on the 4-hour time frame.
The 38.2% level seems to be holding for now, as it lines up with the .8700 broken support. However, a higher pullback could still take place and lead to a test of the simple moving averages, as the 100 and 200 SMA line up with the 61.8% Fib. Stochastic is pointing down, reflecting a pickup in selling momentum.
On the other hand, MACD is still moving up, which indicates that there is room for a larger correction. The .8700-.8750 psychological levels might hold as resistance if the downtrend remains intact but a break past these resistance levels could show that a reversal is starting.
There are no event risks for this setup as US banks are on holiday today. Earlier today, Australia reported a decline in its NAB business confidence report, as the reading slipped from 5 to 4.
By Kate Curtis from Trader’s Way