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- Triple bottom has formed, signalling trend reversal

- Aussie Dollar now a buy candidate if it can break above the neckline

- U.S.-China trade deal a possible catalyst

The Australian Dollar / U.S. Dollar exchange rate is poised to reverse trend and start climbing, according to strategists at Asia-Pacific lender Maybank, who say the pair has formed a ‘triple bottom’ basing pattern and is a ‘buy on dips’ candidate.

“The recent dip seems to have formed a triple bottom for the AUDUSD and that supports our view is to continue to accumulate on dips for this pair. Supports at 0.70 before 0.6920,” says Saktiandi Supaat, an analyst at Maybank in Singapore.

Financial markets often form complex topping and bottoming patterns before changing trend, and recent technical studies suggest this appears to be the case on AUD/USD.

The pattern actually looks more like an inverse head and shoulders (H&S), which is a particular type of triple bottom in which the middle trough low is lower (the head) than those either side (the shoulders).

If it is a triple bottom then confirmation of a reversal would come from a break above the neckline at around 0.7150-0.7200. Yet resistance from the 50-day MA just above the neckline at 0.7224 could spoil an attempted break higher so more preferable would be to set the confirmation level slightly higher at 0.7250.

The upside forecast is supported by the observation that the 21-day MA looks on track to cut above the 100-day MA to the upside – a move typically associated with a bullish signal.

Bullish momentum has waned on the daily chart, says Supaat, but on the weekly chart above it remains strong and is actually converging bullishly with price action.

The pair lost ground last week after Australian inflation data surprised to the downside reviving expectations the Reserve Bank of Australia (RBA) might deliver a rate cut. The RBA meets on May 8.

China data and outlook is also a key factor influencing the Aussie given the two countries close trade ties. Overall Chinese data has been positive recently despite today’s slowdown in Manufacturing PMI, and this has supported AUD.

Most analysts now think China may have turned the corner from its recent blip and will probably undergo a gentle “U-shaped” recover, at least according to Rupert Harrison a portfolio manager at Blackrock, speaking on Bloomberg News following the release of the PMI data.

In regards to U.S.-China trade talks, the news flow indicates officials may be close to agreeing on a trade deal, and the announcement of such a deal would provide an upside boost the Aussie, potentially providing the catalyst for a break higher.