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We sold the Australian Dollarafter prices put in a bearish Evening Star candle formation, hinting the currency may be carving out a top in the 0.9051-85 area against its US counterpart (marked by the January 13 closing and swing highs). The emergence of negative RSI divergence bolsters the case for further weakness.
Prices are attempting to make downside progress but follow-through has been limited thus far. We will remain short for now, initially looking for a daily close below the 14.6% Fibonacci expansion at 0.8919. If that materializes, we will aim for the next objective at 0.8821, marked by the 23.6% level. A stop-loss will be activated on a close above 0.9085.
Daily Chart - Created Using FXCM Marketscope 2.0
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com