AUDUSD stretched its nine-day rally to a new six-month high of 0.7030 on December 31, penetrating the upward sloping channel to the upside, before pulling slightly lower.
The pair rallied very sharply at the end of the previous year, but now it seems to be losing momentum as the RSI is turning lower below the 70 level for a potential downside correction. Also, the stochastic oscillator completed a bearish crossover within the %K and %D lines in the overbought area, indicating more losses.
Should weakness extend lower, support to downside movements could be initially detected within the 23.6% Fibonacci retracement level of the upleg from 0.6670 to 0.7030 near 0.6945 and the 0.6930 – 0.6940 region. Clearing this zone, the next stop could be around the 38.2% Fibonacci of 0.6893, which stands around the 40-day SMA.
Alternatively, the pair needs to overcome the six-month top of 0.7030 to meet a key barrier of 0.7080. The 0.7200 psychological mark could act as resistance too even higher moves.
All in all, AUDUSD may start a downward path if it fails to close another day above the mentioned channel in the short-term picture.