AUDUSD is forming a double bottom pattern on its 1-hour chart, signaling a potential reversal from the selloff.

 Price has failed in its last two attempts to break below the .7250 minor psychological support level and is on its way to test resistance at the .7350 neckline.

A break above the neckline could set off as much as 100 pips in gains, which is the same height as the chart formation. However, if the resistance holds, another move towards the .7250 mark or lower could take place.

Stochastic is in the overbought region, signaling that the rally might already be over. RSI is still on the move up, indicating that there’s a bit of buying momentum left for a test of the neckline. Meanwhile, the 100 SMA is below the 200 SMA, confirming that the longer-term downtrend could carry on.

Weaker than expected advanced GDP data from the US triggered a bit of a dollar selloff, following the FOMC statement earlier in the week. Fed officials declined to commit to tightening in September, citing that they’d pay wait for more labor market improvements before hiking interest rates. With that, the upcoming NFP release could have a strong say in dollar trends.

As for Australia, the quarterly PPI report released earlier today showed better than expected results. Producer prices were up 0.3%, higher than the estimated 0.2% uptick but weaker than the previous 0.5% gain. Private sector credit was also slightly weaker than expected with a 0.4% increase instead of the estimated 0.5% rise.

Only medium-tier reports are lined up from the US for the rest of the day, as profit-taking activity at the end of the month could push AUDUSD around as well. Over the weekend, China will be releasing its official manufacturing and non-manufacturing PMI readings which might also lead to AUDUSD gaps in Monday’s open.

By Kate Curtis from Trader’s Way