Is AUD-USD Starting a Major Correction?

By: Mike Kulej

The Australian Dollar has been the strongest currency among the majors for a long time, with a possible exception of the Swiss Franc. In case of its relation to the US Dollar, the AUD has been in the all time high territory, climbing to as high as 1.1011 in early May.

That level proved to be a strong resistance. The AUD-USD promptly dropped to 1.0535, before rallying once again. This time, however, it failed to make another high, reaching 1.0888. Currently, the price is falling and getting closer to low established last week.

AUD-USD Analysis, May 13, 2011

So far, the behavior of the AUD-USD might only be a normal correction in a strong bull market. That could change if the support of 1.0535 is broken. A move under that low would be a second price swing down, likely leading to much lower prices. The most logical destination will be 1.0250, where the daily chart displays a confluence of potential support from an earlier high and the 100 SMA.


If the AUD-USD indeed drops under 1.0535, we would like to see additional confirmation. For example, the MACD should move under the zero line, while the ADX line should rise, suggesting a strengthening down trend. We will find out soon.