AUDUSD – Broke above trendline resistance & 200-day sma, but our bias is more cautious

A month ago we highlighted two technical outlooks for AUDUSD, however both suggested the Aussie could be carving out a near-term bottom. Sure enough, the pair ended up following the A-B-C corrective outlook, as AUDUSD found support shortly after testing all three of the noted bullets at the beginning of March:

• 3-Wave correction could test 38.2% retracement near 0.892
• Length of Wave-C = Wave-A around 0.8905
• Move would terminate near prior Wave-4 low

The ensuing recovery over the next few weeks saw AUDUSD slowly grind higher, making a series of higher highs and higher lows in the process – The definition of an uptrend. This bullish momentum helped Aussie break above the key 0.9120/40 level over the past 24-hours, which saw long-term trendline resistance (drawn from the April 2013 high) and the 200-day sma. Ideally, this should be a very bullish development for AUDUSD, however two technical factors led us to be somewhat more skeptical about the potential sustainability of further gains:

• Daily RSI has failed repeatedly into the key 60/65 zone – Break above needed to signify renewed uptrend in price
• 13-day sma still remains far below the daily 144 & 169 ema’s – Typically a bearish indication

That being said, both of these elements could change over the coming sessions, but while they remain intact it may be imprudent to think the Aussie will sustain a break above the 50% retracement around 0.9205/10.
Key Australian events which may influence AUDUSD over next few hours:

• 18:30 ET – RBA Deputy Governor Lowe speaks
• 20:30 ET – RBA Financial Stability Review
• 23:30 ET – RBA Governor Stevens speaks

Chart Source: Forex Charts by eSignal