AUD/USD Range Trading above 200-Day EMA

AUD/USD (daily chart as of June 2, 2014) has retreated once again to test the important 200-day EMA. Note that the 100-day EMA also overlaps with the 200-day EMA, which together create stronger support.

The pair has managed to trade above the 200-day EMA since March 26 (gray shadow on chart). It is the pair’s second attempt to break out above the long-term moving average since the downtrend started in April 2013.

The first attempt occurred on October 17, 2013 (red shadow), mentioned in our previous analysis. It appears that the pair is now trading in a triangle-like range between line 3 and the 200-day EMA (or line 4). Price needs to hold the 200-day EMA and break out above line 3 for a potential longer-term uptrend move.

Technically, a triangle after an uptrend move is a potential continuation pattern. However, the retreat from May 30 occurred without even testing the upper border of the triangle range, indicating weakening upside momentum. If price can hold the 200-day EMA, it should be able to trade higher to test line 3.

Australian Building Permits (MoM) declined sharply, dropping by 5.6% against 1.8% expected. The RBA’s interest rate decision is scheduled for June 3.

Support levels below:
1st support: 200-day EMA
2nd support: 0.9085 (January 13 high)
3rd support: 0.8890 (multiple highs and lows)

Resistance levels above:
1st resistance: short-term downtrend line 3
2nd resistance: 0.9460 (April 10 high)
3rd resistance: 0.9540 (November 6, 2013 high)