Stretched consolidation near 0.7500 signals inventory adjustment

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  • A prolonged consolidation near a five-month high indicates an adjustment in stocks.
  • The 20 and 50 period flat EMAs signal lackluster movement.
  • Aussie bulls can take control if the asset breaks above 0.7540.

AUD/USD is witnessing an accelerated consolidation after hitting a yearly high of 0.7540. The Aussie bulls appear to be failing to hold above 0.7500 and have posted several failed attempts to breach the yearly highs.

On a four-hour scale, AUD/USD has been hovering in a range of 0.7460 to 0.7540 since last week. Usually, an elongated swing after a firmer rally indicates an inventory adjustment in which institutional investors shift their stocks to retail participants.

The 20 and 50 period exponential moving averages (EMA) at 0.7495 and 0.7475 have turned horizontal, signaling consolidation in the asset.

While the momentum oscillator, the Relative Strength Index (RSI) (14) moved into a range of 40.00-60.00 from a bullish range of 60.00-80.00 , indicating a lackluster development in the future. In addition, Australian bulls have lost their strength.

A slide below the March 29th low at 0.7455 will take the asset to the March 10th high at 0.7369, followed by rounding level support at 0.7300.

On the other hand, the Australian bulls can dictate the price if the asset breaks above the March 28 high at 0.7541, which will lead the pair towards the resistance of the round level at 0.7600, followed by the high of the June 17, 2021 at 0.7646.

AUD/USD four-hour chart

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