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November 25, 2013 – AUD/USD (daily chart) has continued to sustain its dramatic plunge of the past week to begin approaching its multi-year depths once again. In the process, the currency pair has just established an 11-week low. The current drop occurs after the pair formed a head-and-shoulders reversal pattern with its late-October high at 0.9757. Shortly after breaking down below the neckline of this reversal pattern in early November, there was a brief pullback to the upside before the pair swiftly began its current slide.

With the downside target of the head-and-shoulders pattern very close to being fulfilled, the directional outlook for AUD/USD continues to be bearish. Overall, the substantial bullish correction that was halted by the noted head-and-shoulders pattern represented a 50% Fibonacci retracement of the long and steep plummet from April to August. Currently, clear downside objectives reside around the 0.9000 psychological support level followed by the noted 0.8850-area multi-year low. Any breakdown activity below the latter level would clearly confirm a continuation of the overall bearish trend. Key upside resistance currently resides around the 0.9300 level.

James Chen, CMT
Chief Technical Strategist
City Index Group


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