The Australian dollar rallied on Monday to the highest since May 19, breaking a above resistance and building a convincing double bottom that could point to a 500-pip rally.
AUD/USD took off right from the open of trading on Monday, steadily climbing to a high of 0.8667. It has since pulled back but the close of 0.8587 was above key resistance at 0.8552. The implications are undoubtedly bullish. We have outlined a double bottom formation that targets 0.9046. The measured target coincides with resistance points at 0.9024 and 0.9074. There is also the 200-day moving average to overcome (yellow) it sits at 0.9110 currently.
The first obstacles, however, will the 50-day and 100-day moving averages at 0.8816 and 0.8952 respectively. We don’t expect a clean break to the upside with the stochastics showing highly overbought signals.
Over the next few days we could see some consolidation but barring a sharp move to the downside, we see a gradual decline toward 0.9000.