the AUD/USD is showing a bull flag continuation chart pattern. But the daily chart also has a clear long-term divergence pattern. This could indicate a reversal as well.
Let’s review the key support and resistance levels to help determine the next price swing.
The AUD/USD will most likely build a larger retracement within wave 4 (pink). A break below the support trend line (green) confirms that price swing to lower levels (orange arrows).
The main target of the retracement are the 38.2% and 50% Fibonacci levels of the wave 4 (pink). These should act as a bouncing spot if the wave outlook is correct (green arrows).
A deeper bearish price swing, however, indicates a reversal (red circle). In that case, a bearish reversal could push price towards the round 0.70 support level (red arrows).
An immediate bullish breakout above the resistance (orange) trend line of the bull flag chart pattern, however, could indicate one more push higher (blue arrow) to complete the wave 5 of wave 5. With divergence in play, this could end the uptrend and start an ABC down.
On the 4 hour chart, an ABC pattern (grey) is clearly visible within the bull flag chart pattern. The key decision zone is the support (green) and resistance (orange) trend lines.
Currently price action is respecting the 23.6% Fibonacci retracement level. A bullish breakout or bullish bounce at the shallow 38.2% Fibonacci level indicates an uptrend.
But be aware that a deeper bearish push confirms a larger bearish reversal and invalidates the current bullish wave outlook.