The new risk-aversion wave allowed the Australian dollar to retract and complete the formation of a new medium term support trendline.
The 4-hour chart reveals a possible third bounce off a trendline which has been in formation since late February. Although the third bounce is not completely defined yet, the formation of a bull candle indicates some kind of support at that point. The even space between the 3 bounce points further validates the trendline pattern.
The fundamental situation remains positive for the aussie. The two main threats are China’s attempts to dampen growth and global risk-aversion which affects commodity prices. On the positive side, the recent RBA rate hikes are good signs of a sustained recovery in Australia. Hence, it is safe to assume that any dip down will renew buying interest from investors.
Buying the AUD/USD on the third point is a valid strategy, but given the short term pressure on equities and oil prices, we might want to let technical trading unfold and wait on a breach of the trendline before entering a long position at one of the two previous bounce points.
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