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  • AUD/USD’s 4-hour chart is reporting a bearish indicator divergence. 
  • A daily chart indicator is flashing an overbought signal.

AUD/USD is currently trading at 0.7017, having hit a five-month high of 0.7032 on Dec.31.

A deeper correction below 0.70 could be in the offing as the 4-hour chart is reporting a bearish divergence of the relative strength index and the MACD histogram. A bearish divergence occurs when an indicator prints lower highs, contradicting higher highs on price and represents bullish exhaustion. 

The Doji candle seen on the 4-hour chart is also signaling buyer exhaustion and validating the overbought or above-70 reading on the 14-day RSI.

The correction case would weaken if the spot finds acceptance above 0.7032. 

4-hour chart

Trend: Pullback likely

Technical levels