AUD/USD Trading In A Falling Wedge

AUD/USD Daily Chart (as of 7/8/2013): The AUD/USD has been range trading in a falling wedge pattern since 6/20. A falling wedge in a downtrend is a potential bullish sign. For the short term, a possible upside move is expected to correct the steep downtrend started in early May. We also had several “high-wave” candles in the wedge indicating a battle between bulls and bears.

The daily RSI is turning up from 30 for the third time to challenge a previously respected uptrend support/resistance line. Note that the RSI has been trying to stay above 30 since 6/28 with price making new lows. That is another important message sent from the market that momentum is not making new lows. We need the RSI to break above that line to finally turn from bearish to bullish for the short-term. Price is still below the daily EMA 20 (green line on chart), which has been acting as resistance for more than two months. Note the MACD has also established bullish divergence.

If price breaks above the upper trend line of the falling wedge, immediate resistance is at 0.9200, followed by the resistance zone shown on the chart between 0.9300 and 0.9400. To the downside, in the event of a failed bullish falling wedge pattern, price may resume the downtrend and find support at around 0.8850, 0.8750, and then 0.8600.