The AUDUSD was another currency pair which had follow through momentum in trading earlier today (in the Asian session) but has recovered as the day has moved on. Trade balance data out of China was now supportive to the AUDUSD.

AUDUSD tried to see what life was like below the lower trend line and did not like it on the first look.

AUDUSD tried to see what life was like below the lower trend line and did not like it on the first look.

The fall earlier took the price below a key trend line support level. This lower trend line was tested on 5 separate occasions including Friday on a number of hourly bars. The move below this line is an acceleration of the downward momentum and that can gather speed in a trending market. However,it can also be a sign the last of the sellers are exiting, if the price is not able to keep the negative momentum and stay below the line. That is the case today. The price of the AUDUSD is back above the broken trend line at 0.8295. Traders who are long can now use that level as a risk defining price. Stay above and further corrective potential exists.

Is the tide totally turned?

No. The pair has been trending lower – just follow the price action in the chart above. If the buyers are to take the bullishness from the failure below, they will need to continue to prove that they can take the next steps toward higher levels. What today’s action does do, if it says from a technical perspective, the field may be a little more balanced at these levels.

So what are the next upside hurdles to get over if the buyers are to continue the corrective action.

Looking at the hourly chart above there is a topside trend line at the 0.8322. That is step 1. Above that, the 38.2% of the move down from last weeks high and the 100 hour MA (at 0.8373 currently) are other targets off of this chart (I expect sellers on the first test).

Before the 100 hour MA, however, is another key level off the weekly chart (see below). Last week, the price fell below a lower trend line connecting the low from 2013 and the January 2014 low. That level comes in at 0.83548.This too will be a level to eye going forward today and this week.

Momentum and trends are hard to turn around. Any dip buyers or rally sellers in most of the major currency pairs have seen their attempts of finding a turning point not as easy as some of the oscillators might suggest. Oversold has become more oversold and overbought has become more overbought. So if trading a reversal, be sure to define risk and watch the targets as well. If the trend is to change, traders should see broken levels (like the 0.8295) hold and targets ahead (like 0.83548 and 0.8373) breached.

AUDUSD is below the lower trend line on the weekly chart.

AUDUSD is below the lower trend line on the weekly chart.