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AUD/USD 1H Chart 8/8/2012 2:15PM EDT

So far this week, the AUD/USD has been flattening out against a rally that goes back to the June 1 low of 0.9590. It is finding resistance just below 1.06 (at about 1.0595), a psychological resistance as well as a previous support pivot for a consolidation period during February. We noted this resistance during the previous post on Friday (8/3) when the pair surged after the positive US NFP.

In the 1H chart we see this market in a sideways consolidation with a slightly lower low during the 8/8 session (1.0530) than the 8/6 session low (1.0535). The 8/8 session is winding down in US trading and as of 2:15PM EDT, the market has shown an intra-day resistance at 1.0580.  Looking at the RSI now, it appears that the reading is becoming stuck between 40 and 60, which would reflect the momentum during consolidation.

A retest of 1.0530 may be in order. Also, a push to 1.05 would satisfy a swing projection seen in the 1H chart. If this sideways consolidation does indeed extend with some bearish bias, a key support resides at 1.0440. This was last week’s support as well as a resistance pivot from 7/19-7/20.

Note that this scenario is bearish in the near-term, but is still within the medium term bullish mode. Since the mode is bullish, we should not expect the bearish outlook to be aggressive, but realize the potential for such a correction as the market flattens at a resistance and rising channel trendline.

On the other hand, if the bullish mode continues without this correction scenario, a break above 1.06 opens up the next resistance pivot in the 1.0845-1.0850 area, the 2012-highs set in January and February.

AUD/USD 1H Chart 8/8/2012 2:20PM EDT

Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes – provider of rex News, Analysis, Education, Videos, Charts, and other trading resources.

Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.