Price is at a crossroads – is it correcting or reversing lower?

• AUD/USD is at a critical level for the uptrend.
• While a recovery is possible, more downside could also signal a reversal.
• The pair reached the top of a range at a level similar to where it pivoted in July.

AUD/USD has been in an uptrend throughout August. It reached a new high of 0.6824 on August 29 and then retreated.

The correction so far is a three-wave structure, perhaps an ABC correction, which suggests that it is only a counter-trend reaction and the uptrend is likely to resume.

If AUD/USD can close above 0.6800 again, it will signal a continuation of the uptrend back to the 0.6824 high first, then possibly higher.

AUD/USD 4 Hour Chart

A smaller extension, however, would call this assumption into question and possibly suggest that the correction could actually be the start of a new downtrend.

For confirmation, price should close below 0.6751, (August 30 low). This would likely be followed by a move down to 0.6700-05 and the 200-period simple moving average (SMA).

AUD/USD is range wide sideways and has retested resistance at the top of the range as it did in July. This could be another indication that the short-term trend could be about to change and the price could start falling again.

The Relative Strength Index (RSI) momentum indicator is in the lower half of its range. It shows a fairly strong bearish momentum accompanied by the pullback from the August 29 high.