FXStreet (Edinburgh) – The bearish sentiment around the Aussie dollar is expected to resume in the short term, suggested analysts at JP Morgan.
Key Quotes
“The decline from the May high suggests an increased risk that the medium term downtrend is back on track”.
“While the short term setup can allow for a corrective pause given the proximity to the next line of key support levels and the current oversold framework, new lows are still expected”.
“Consistent with the medium term bearish backdrop, note that the decline from the May high has developed with an impulsive trending bias which contrasts with the corrective lift from the April low”.
“Importantly, this has been the prevailing theme since the mid-2014 high. Until the character to the price action changes, retracements will be viewed as selling opportunities”.
“The important support and test for the bearish view starts with the .7533 April low. Violations should allow for an extension into the .7310/.7190 support zone. This area represents the 76.4% retracement from the 2008 low, as well as the 61.8% retracement and uptrendline from the 2001 secular low. Given the importance of this support area, we are wary that a corrective phase could develop against these levels. Until then, the downside risks are expected to prevail”.
“Note that near term retracements should find resistance in the .7820/40 zone (38.2% retracement), but a break above the .7950 area is necessary to argue for a retest of the .8163 May peak. Importantly, the ability to extend through here would confirm at least a short term bullish shift”.
(Market News Provided by FXstreet)