AUD/USD: The daily cycle still favors further upside

From a daily perspective, I still perceive this market as a buy on dips, although more prudence is warranted after the sizeable bearish candle closed at the very lows of the day (no profit-taking). I got filled a long position but the close of the candle suggests some adjustment in risk. I still like to buy it at the 70% retrac with the daily cycle still in favor, so happy to give it a shot.

On the hourly chart, sellers have taken over after the breakout of the structure at 0.7250, which suggests that any recovery should find a major wall of offers at the mentioned level. A break above would then expose the next target of 0.7295/0.73. To the downside, if the downside momentum finds new legs, the 100% proj target can be found at the 0.7166, where a level of hourly support interests.

From a valuation standpoint, the AU vs US yield spread does argue for buy on dips to still be justified. Notice how strong the correlation on a 10-period has been. On the flip side, the sell-off in the Hang Send does send us some warning signs as the index rolls over and I must say, the correlation it has shown vs the AUD is very strong.