Crucial Week for AUD/USD

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The AUD/USD has been a busy pair since mid-March of this year, covering 1,693 pips (1.1080 to 0.9387) in that time. As the six month daily chart below shows, after peaking at 1.1079 (July 27), the Australian dollar underwent a drastic correction against the greenback, plunging down to as low as 0.9386 (October 4th) – equating to a 15.3% drop. During that correction, a major resistance level was formed at 1.0765 (September 4th). That price proved to be the highest that the pair could climb before continuing the descent into the low 0.90's. October was an extremely strong month for the AUD/USD, as the pair gained as much as 14.5%, vaulting above parity once again. On October 27, the pair tested 1.0765 again; and once again, it failed. After the failed attempt, the AUD/USD quickly retreated down to 1.2022 before finding some buying support – currently trading at 1.0316. The move into that resistance area after such a prolonged surge left the pair over-extended, with the RSI (14 day) indicator peaking out at 78 (overbought signal). This week should prove to be a significant one for the AUD/USD, as it is currently stuck in the middle of two important price levels (support – 1.011 and resistance – 1.0765). A break above or below either of these two levels could trigger a significant move in the corresponding direction. If buyers can regroup and push the pair above resistance, it will complete the inverse head and shoulders pattern (bullish) and make a run at the 52-week high of 1.1079 appear imminent. Conversely, should sellers be able to push the AUD/USD below support, look for a quick retest of .0.99262, followed by the 52-week low of $0.0386. Technically, the pair remains in a downtrend considering the series of lower lows and lower highs (since August). The AUD/USD's high level of volatility recently indicates that a decisive move is nearing. In October alone, this pair moved 1,366 pips from the low to the high of the month (0.9387 to 1.0753). The current average movement for the pair is 169 pips a day, compared to a historic average of 125 pips a day. 6 Month AUD/USD Daily Chart
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