AUD/USD Forex Technical Analysis – Counter-Trend Buyers Eyeing .6854 – .6891 Retracement Zone

The Australian Dollar is surging early Friday as speculators took profits on short positions, while bonds outperformed after Australia’s central bank sounded less-hawkish on future rate hikes. After a test of its lowest level since July 14 on Wednesday, the Aussie is now trading higher for the week.

At 04:30 GMT, the AUD/USD is trading .6824, up 0.0073 or +1.08%. On Thursday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $66.70, down $0.32 or -0.48%.

Traders are covering short AUD/USD positions despite dovish remarks from Reserve Bank of Australia (RBA) Governor Philip Lowe, who opened the door to smaller hikes now that rates have already been raised 220 basis point.

The market reacted by scaling back the chance of another 50-basis-point hike in October, while the peak for rates was now seen around 3.67% compared to 3.85% early in the week.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum has been trending higher since the formation of the closing price reversal bottom on September 7.

A trade through .6699 will signal a resumption of the downtrend. A move through .7009 will change the main trend to up.

The minor range is down. A trade through .6832 will change the minor trend to up. This will confirm the shift in momentum.

On the downside, the minor support is a pivot at .6765.

On the upside, the nearest resistance is a short-term retracement zone at .6854 to .6891. The major resistance zone is .6983 to .7053.

Daily Swing Chart Technical Forecast

Trader reaction to the minor pivot at .6765 is likely to determine the direction of the AUD/USD early Friday.

Bullish Scenario

A sustained move over .6766 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into the minor top at .6832. This is followed closely by a short-term 50% level at .6854.

Taking out .6854 will indicate the buying is getting stronger with the short-term Fibonacci level at .6891 the next target.

Bearish Scenario

A sustained move under .6765 will signal the presence of sellers. This could lead to a retest of this week’s low at .6699, followed by the July 14 main bottom at .6682.

Side Notes

With the main trend down, look for sellers to show up on the first test of the short-term retracement zone at .6854 to .6891. This is the objective of Wednesday’s closing price reversal bottom.