AUDUSD bulls are currently staging their fifth breakout from the rectangle that has been dominating the price action since February 24, 2023. Compared to the last breakout in mid-June, the bulls have managed to break the February 2, 2023 downward sloping trendline and they are now preparing to finally record a decisive move higher.

Most momentum indicators are currently on their side. The Average Directional Movement Index (ADX) has just climbed above its 25-threshold and it is pointing to a muted bullish trend in the market. More significantly, the stochastic oscillator has jumped higher, building a significant gap from its moving average, and hence signaling increasing bullish pressure in AUDUSD.

If the bulls remain determined to record a strong upleg, they will come up against the 50% Fibonacci retracement level of the April 5, 2022 – October 13, 2022 downtrend at 0.6815. Breaking this level would then open the door for a move towards the 0.7063-0.7091 area, and potentially the 2023 high of 0.7157, which stands a tad below the March 15, 2022 low at 0.7165.

On the flip side, the RSI is sending an early rally-exhaustion signal as it appears to have peaked. Coupled with the simple moving averages’ (SMA) convergence pointing to a large move soon, the bears could try to exploit these signs for their own benefit.

They seem keen in pushing AUDUSD below the February 2, 2023 downward sloping trendline and back inside the aforementioned rectangle. The bears could then try to stage a sell-off towards the 38.2% Fibonacci retracement at 0.6739 and possibly have a go at the much busier 0.6680-0.6712 range.

To sum up, the bulls have to keep AUDUSD above the February 2, 2023 downward sloping trendline. Otherwise, the current upleg might be seen as another false breakout and open the door for a sizeable pullback.