AUD/USD is currently trading within a tight range, which is itself within a larger range. This indicates that the pair is consolidating and preparing for a potential breakout in the near future. The trend prior to the formation of the range was bullish, making an upside breakout slightly more likely.
On the 4-hour chart, AUD/USD is showing a mini range within the larger range, with prices moving sideways since mid-May. Recent fluctuations have narrowed the trading range even further, creating a “range-within-a-range” pattern.
A breakout above the mini-range high at 0.6679 could signal a continuation towards the larger-range ceiling at 0.6709. Conversely, a break below the mini-range low at 0.6625 may lead to a move down to the larger-range floor at 0.6590. As long as price remains within the bounds of the larger range, the short-term trend is likely to remain sideways.
Eventually, the pair is expected to break out of its range in a strong move, as periods of low volatility are often followed by sudden bursts of high volatility. Given the previous bullish trend, an upside breakout is slightly more probable.
A decisive breakout would involve a longer-than-average candle closing near its high or low, or three successive candles breaking cleanly through the range boundaries. Targets for a breakout are determined using technical analysis methods, such as extrapolating the range height by a Fibonacci ratio.
In the event of an upside breakout, a conservative target is set at 0.6770, while a downside breakout could lead to an initial target at 0.6521. Traders should watch for clear signs of a breakout to confirm the direction of the next major move in AUD/USD.