By: Michael Boutros, Sr. Technical Strategist
The Australian dollar has dropped 2.4% from its high and is heading for a third consecutive weekly decline after a rally of more than 5.4% ran out of road. The Australian dollar rally stalled at Fibonacci resistance, where a 100% extension, a 61.8% retracement and the median line of the current structure converge in a single zone. The reversal from that zone has since broken the Australian dollar uptrend that carried the rally, with the Federal Reserve decision fueling the drop. The question for the Australian dollar is now whether a routine pullback turns into a deeper correction.
Michael Boutros, StoneX Media Senior Market Analyst, has spent more than 20 years trading and analyzing FX, commodities and equity indices, and has hosted the Weekly Strategy Webinar for more than a decade. His technical work reads price structure across multiple time frames with a medium-term, event-driven focus, tracking where Fibonacci levels, trendlines and momentum line up on currencies such as the Australian dollar.
The Australian dollar rally of more than 5.4% stalled where a 100% Fibonacci extension, a 61.8% retracement of the decline from the 2021 highs and the median line of the current structure all meet. "That rally faltered right into the start of September. The major resistance zone we've been watching for quite some time." That is how Boutros describes the turn in the Australian dollar. The three measures come from different swings, the rally off the prior year's low and the larger decline from the 2021 highs, yet they point to the same area. As a result, the Australian dollar met resistance that was mapped well in advance, and the reversal from it has extended into a third straight weekly decline.
The Australian dollar has broken the uptrend that carried its rally, with the Federal Reserve decision fueling the drop and daily RSI momentum sliding to a multi-month low. For the Australian dollar, a daily close below nearby support keeps the immediate downside bias in play, with the 200-day moving average and the 61.8% retracement of the rally marking the next major objective. Two equal legs off the high would complete a proper Elliott correction, a structure that separates a measured pullback from a trend change. Conversely, the monthly open marks bearish invalidation for the Australian dollar. According to Boutros, "Ultimately, the Bulls would need to mark a daily close above this zone to suggest that a much more significant low is in place and a larger reversal is underway."
--- Written by Frédéric Guétin, StoneX Media Producer
--- Expert: Michael Boutros, StoneX Media Senior Market Analyst
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A rally of more than 5.4% in the Australian dollar stalled at a zone where three Fibonacci measures converge, and the reversal has broken the uptrend that carried it. The structure behind that resistance, and the daily closes that separate a pullback from a trend change, explain what the Australian dollar is testing now.
The Australian labor market is softening at the edges, with part-time job losses pulling employment lower as unemployment holds at 4.5%. That gradual pace leaves the Reserve Bank of Australia room to stay hawkish, with participation still high by historical standards.
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