AUDUSD tested the .7650 minor psychological resistance before selling off sharply last week and a look at the daily time frame shows that this resistance is a long-term area of interest.

It held as support in the first half of 2015 before the Chinese stock market slump triggered a breakdown in July last year.

Price could be ready to resume its drop, possibly until the previous year lows around the .6900 major psychological mark or at least until the area of interest at .7300 in the near term. However, the 100 SMA is above the 200 SMA for now so the path of least resistance may be to the upside. In addition, the 200 SMA appears to be holding as a dynamic inflection point for now.

Stochastic is pointing down and starting to move out of the overbought region, indicating that bearish momentum is taking hold. Similarly RSI is heading south so AUDUSD might follow suit. If an upside breakout from the .7650 area takes place, however, AUDUSD could move up to the next resistance at .8000.

Last week's EU referendum sparked a sharp selloff for higher-yielding currencies, as the Brexit could put a drag on global growth and therefore demand for commodities. However, the Australian dollar appears to be drawing support from the rally in gold prices, which tend to climb in times of risk aversion.

There are no major events lined up from the Australian economy this week, although the Chinese PMI readings due on Friday could bring some volatility. Small declines are eyed for both manufacturing and non-manufacturing components and weaker than expected results could lead to Aussie losses.

As for the dollar, the US currency is supported by risk-off flows at the moment, although the Fed's likely preference to hold off any rate hikes at this point might dampen further gains. The US final GDP reading for Q1 is up for release tomorrow and the ISM manufacturing PMI is due on Friday.

Editor’s Note: Equity investors/traders can use the Currency Shares Australian Dollar Trust (FXA, quote) ETF to take positions in the Aussie dollar without a FOREX account.  The ETF looks to track the price of the Aussie dollar (AUDUSD), minus ETF fee. The fund seeks to reflect the price of the Aussie dollar (AUDUSD) with the shares representing a cost-effective investment relative to investing in the FOREX market.

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