AUD/USD (daily chart) as of Thursday (9/29/2011) has consolidated above key support in the 0.9700 price region. This occurs after price action dropped precipitously from its high just under 1.0800 in the beginning of the month. The month of September has shown a strong and steep bearish trend that has thus far culminated in an attempt to breakdown below 0.9700, but the pair has been unable to make a significant breach as of yet. But downside momentum for AUD/USD does not appear yet to be over. Price should make another attempt at breaking down below 0.9700, in which case the clear downside target resides around the key 0.9400 price region, which is not only a very important prior support/resistance level, but also the 161.8% Fibonacci extension of the last major bullish correction, represented by the steep rising wedge. If price is able to reach its 0.9400 area target, AUD/USD will have established at least a one-year historical low.
(Click on chart to enlarge. Forex chart key: price on 1st pane, Stochastics 14,3,3 on 2nd pane; horizontal support/resistance levels in black; uptrend lines in green; downtrend lines in red; 50-period simple moving average (SMA) in orange; 100-period SMA in brown; 200-period SMA in dark blue; Fibonacci levels in magenta.)
James Chen, CTA, CMT
Director of Technical Research and Education