AUDUSD has been on a strong downtrend since the start of the month but may be due for a quick correction after gapping down early this trading week.

Price dipped below the .9000 major psychological level and could pull up to the .9100 mark before heading further south.

MACD is reflecting a pickup in buying momentum, which might be enough to push AUDUSD to the 38.2% Fibonacci retracement level from the latest swing high and low. This is close to the .9100 area and the 100 simple moving average, which could hold as dynamic resistance for the pair.

A higher retracement could last until the .9150 minor psychological resistance, which is close to the 200 simple moving average. Stochastic is climbing to the overbought zone, indicating that there’s enough buying pressure left for a market correction.

A return of sellers could push AUDUSD back to its recent lows around .8990 or lower to the .8900 major psychological support zone. Event risks for this setup are the FOMC statement and the RBA minutes release.

Shorting at .9100 with a stop above .9150 and a target of .8900 could yield a 4:1 return on risk, with the use of a trailing stop to protect profits and minimize exposure.

By Kate Curtis from Trader’s Way