Australian dollar technical analysis

Via NAB:

Trend
Price has traded in a broad triangle since the low of early 2016 that has neither confirmed nor rejected the multi-year downtrend. The July break above two-year range highs at 0.7835 and the 2016/2017 trend resistance at 0.7700/30 was the first piece of information in this period that has confirmed a decisive and sustainable MT uptrend bias. This comes off the back of June’s impulsive upswing and further justifies a continuing multi-month uptrend. These breakouts open up the topside with the next major resistance level at 0.8250/0.8350, this being a textbook projection of the July triangle breakout. Recent weeks have seen the uptrend pause however the uptrend structure remains firm while daily closes are above 0.7808. Bigger picture only a weekly close below 0.7700/30 would negate the MT uptrend bias.

Momentum
LT momentum indicators remain positive and confirm an ongoing MT/LT uptrend bias. MT momentum has shifted to a negative bias in the recent weeks after testing overbought and historically unsustainable levels. This is typical in a corrective phase.

Outlook
The positive outlook that we have identified in recent months remains in play. Additional bullish confirmation will be achieved with a monthly close above the 50-month MA at 0.8030. While weekly closes remain above 0.7700/30 we target a multi-week to multi-month uptrend towards 0.8250/0.8350. ST risks have increased however with poor price action amid a negative MT momentum shift. Relatively neutral ST bias.

I personally think that the probabilities favour the AUD having already topped out. But it’s not hard see where that could end up being wrong. The three risks are:

• Trump’s tax plan fails and the USD falls;
• Chinese growth rebounds out of it winter cuts with iron ore back at $70 (only for a quarter or so), and
• the RBA hikes rates.

Of these the first one is unlikely, the second is probable and the third very unlikely.