AUD/USD Analysis: Consolidation Phase Follows Retracement from May 3 Peak

AUD/USD is currently consolidating its position in the mid-0.6610s following a pullback from its peak on May 3. Despite the sideways movement over the past week, there are indications of a short-term uptrend, as evidenced by the rising sequence of peaks and troughs since April 19.

Considering the adage “the trend is your friend,” the likelihood tilts in favor of AUD/USD ascending further.

Although attempts to breach the 0.6624 resistance level have been unsuccessful thus far, a breakthrough would validate further upward movement towards the May 3 high of 0.6649. A successful breach of 0.6624 typically triggers a volatile upward shift, given its significance after multiple touchpoints.

The subsequent target could potentially be around 0.6680-90, supported by a potential Measured Move pattern formed since the April 19 lows. Measured Moves typically consist of three waves labeled A, B, and C, with the expectation that wave C will mirror the length of wave A or Fibonacci 0.681 of it. While wave C has already reached the Fibonacci 0.681 target at the May 3 highs, it could potentially achieve the target where C equals A at 0.6690.

A decisive breach below the red trendline would signal a bearish trend reversal. Such a breach would be characterized by a prolonged downward movement, often indicated by a long red candle closing near its low or a sequence of three consecutive red candles breaking below the trendline.