The Australian dollar/U.S. dollar has remained subdued as people flock to the dollar when employment data are released.
Trading at around 0.7386 for most of Thursday's European session, it is apparent that the recovery from the low of 0.7372 was capped at 0.7419, which is also the 200MA on the H1 chart. The bullish recovery took part for most of the Asian session, but that ended almost exactly as Thursday’s European session opened.
Crucial support levels to watch
The two key supports that are in focus right now are Thursday’s low of 0.7372, which the price is close to reaching for a second consecutive day, but even more important is the low of 0.7363 on Nov. 24Â when the recovery from last week started. The price action also remains well below the 200MA, and this is a crucial position to watch if looking for immediate bearish entries. The price is expected to remain flat if the current support is not broken. Expect the trend to thin out into a tight triangle before a violent break with both bearish and bullish directions possible.
However, since the pair remains within a medium-term bearish bias, we would be keen to look at entering short positions albeit at higher levels. Bearing in mind that Wednesday trading saw the pair register the largest decline in over two weeks, it is OK to consider the current price levels as slightly oversold.
Signs of over-selling still exist
A daily close below the same 0.7360 to 0.7380 level will strengthen resolve to head toward the November monthly low around 0.7310. On the H1 chart, the 55EMA is already looking primed to make a cross back below the 200MA. Over the next two sessions, the crossover between the 55MA and the 200MA would be a confirmation that the recovery that began on Nov. 18 has indeed ended.
Chart: Austalian dollar/U.S. dollar back at week lows. Screenshot from MetaTrader includes MAs and MT4 trend indicator as trend histogram and template.
It would be wise to wait for a slightly higher entry position instead of chasing the move from the current lows. Traders can wait for the price action to relax a bit, with a move back to 0.7400 being a favorable psychological level that is still within reach of November’s closing price of 0.7385. A move back above 0.7400 will however not mean that the general trend has shifted back to bullish. Only a convincing recovery above 0.7495 top (Nov. 29 and the 50% Fib retracement of the November low and high) will offer enough proof that bullish recovery has resumed.
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