The AUDUSD has been faced with a longer corrective period which lasted over the past 18 trading months, but has found support at a double bottom formation. The rally took this currency pair from an intra-day high of 1.0856 to an intra-day low of 0.8641 from where the AUDUSD was able to find support. This currency pair could be subject to a short-covering rally and was able to move higher over the past three trading weeks.

Given the sharp drop the next solid resistance level is located at the 38.2 Fibonacci Retracement Level which is located at 0.9440 in the current technical scenario. There is a descending resistance level which is located between the current price and the 38.2 FRT. Forex traders are advised to spread their entries over a 100 pips range between 0.8750 and 0.8850. The downward potential appears to be rather limited while the upside potential remains very attractive.

Timeframe: W1 

Recommendation: Short Position

Entry Zone: 0.8750 – 0.8850

Take Profit Zone: 0.9885 – 0.9985

Stop Loss Zone: 0.8450 – 0.8550