AUD/USD Divergence at Long-Term Support

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Bounce or break? This pair is testing a key support level, and this divergence seems to be suggesting that it might hold.

Long AUD/USD Idea

AUD/USD has been hovering around the long-term support at .6675-.6700 for quite some time, and it seems that bulls are keen on defending this level.

Price formed lower lows but stochastic is showing higher lows, creating a bullish divergence visible on its 4-hour time frame. This could be enough to draw more buyers in, possibly completing the formation of a double bottom with a neckline at .6775.

Australia’s fundamentals support a bullish view as economic reports have been mostly upbeat and the RBA sounded optimistic about growth prospects in their latest statement.

AUD/USD Daily Forex Chart
AUD/USD Daily Forex Chart

However, risk sentiment isn’t exactly on the Aussie’s side while coronavirus concerns remain in play. After all, the outbreak is likely to take a huge toll on demand from China, which is the Land Down Under’s top trading buddy.

Then again, it looks like market participants are reacting more to positive updates these days and don’t seem to be as bothered by the increase in confirmed cases or fatalities.

If this keeps up, the safe-haven dollar could be poised to return most of its risk-off gains, especially if headlines suggest that authorities are able to keep the situation contained.

As for economic releases, only the retail sales report is due from Uncle Sam this week, and analysts are expecting to see a slowdown in consumer spending for January.

I’m looking to go long on a move past the .6700 handle, with a stop below the recent lows of .6660. Any suggestions where I could set my target on this potential long-term play?

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