AUDUSD Ascending Channel (Feb 29, 2016)

Price is currently testing the trend line support and might be due for a bounce or a break.

A bearish flag appears to have formed right after the sharp selloff, indicating that a continuation of the drop might be seen, likely taking AUDUSD down by an additional 100 pips or the same height as the flag's mast. However, oscillators are indicating oversold conditions so a bounce might still be possible.

In that case, a move up to the channel resistance at the .7250 minor psychological level might take place. The 100 SMA is still above the 200 SMA for now, suggesting that the path of least resistance is to the upside.

Data from the US came in mostly stronger than expected last week, with the US preliminary GDP reading upgraded from 0.7% to 1.0% instead of being downgraded to the estimated 0.4% figure. Personal spending and income reports also beat expectations with gains of 0.5% each.

Earlier today, Australia printed weaker than expected company operating profits data, as the figure fell 2.8% in the last quarter of 2015. The MI inflation gauge fell 0.2% after previously gaining 0.4% while private sector credit showed a 0.5% uptick as expected.

Up ahead, the Chinese PMI releases and RBA statement could serve as strong catalysts for a move tomorrow, as downbeat results could spark a longer-term selloff. Australia's GDP, trade balance, and retail sales data are also up for release later on in the week.

By Kate Curtis from Trader's Way