Odds favor continuation of short-term downtrend

• AUD/USD has extended its downtrend to the 200-period SMA. 
• It is biased to fall further although RSI is mildly oversold.  

AUD/USD extends the short-term downtrend it began after rolling over at the August 29 highs. 

According to technical analysis theory, “the trend is your friend” which suggests the odds favor AUD/USD further extending its downtrend to lower lows.  

AUD/USD 4-hour Chart

AUD/USD has met the next downside target at 0.6645 and is finding support at the 200-period Simple Moving Average (SMA). If it can close below 200 SMA and 0.6645 it will indicate the downtrend is probably falling further, with the next target at 0.6587, the 0.50 Fibonacci ratio retracement level of the August rally. 

The Relative Strength Index (RSI) momentum indicator is mildly oversold, advising traders not to add to their short positions. There is a risk of a correction, but for this to gain credence the RSI would need to recover firmly back into neutral territory. 

Further weakness could see AUD/USD fall to 0.6565 (August 15 low), followed by 0.6532, the 0.618 ration Fibonacci retracement of the August rally. At that level it will probably encounter firmer support.