By: Mike Kulej
The Australian Dollar had a strong run in the last days of 2010. While the rally was broad and against many currencies, the AUD-USD received the most attention. And for a good reason – this pair made another all time high, reaching 1.0255.
During last week, the price pulled back, falling to just under 1.0000. For all practical purposes, the parity became a new support level. This correction made the high of 1.0255 stand out, especially in relation to the previous extreme of 1.0182. What we can see on the daily chart of the AUD-USD is a possible double top.
It is certainly likely. This pattern would mark a turning point in a longer-term trend. So far, technical indicators are in line with this possibility. We can see divergences on both the MACD and the Commodity Channel Index graphs, which support a major topping pattern.
However, the price action itself has not confirmed it yet. All the supports are holding, including the trendline (which is tested now), the 100 SMA, the Ichimoku Cloud and the recent lows. For the AUD-USD to truly reverse, all these obstacles must give way. That, in turn could pave the way for a larger sell off, but at least for now, the uptrend is still in force.