AUD/USD Forex Technical Analysis – Declining Risk Sentiment Fueling Move into .6464 – .6402

The Australian Dollar is down early Monday, pressured by a drop in global market sentiment as investors fret over the U.S. Federal Reserve’s hawkish rate policy to tame inflation that will drag major economies into recession.

The Aussie is trading near its lowest level in over two years as an aggressive Fed, worries about global growth, and geopolitical concerns from Russia’s war in Ukraine bolstered the safe-haven dollar.

At 02:35 GMT, the AUD/USD is trading .6514, down .0021 or -0.33%. On Friday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) finished at $64.68, down $1.12 or -1.70%.

Risk-off sentiment continues to prevail after last week’s Federal Reserve interest rate hike with Chairman Jerome Powell vowing policymakers would “keep at” their battle to beat inflation. Meanwhile, the Reserve Bank of Australia (RBA) is not likely to keep pace with the Fed making the U.S. Dollar a more attractive investment.

Last Wednesday, the Fed raised its benchmark rate by 75 basis points. The RBA is forecast to raise its benchmark by only 50 basis points. The pace of the U.S. rate hikes has narrowed the yield premium of Australian government debt over U.S. Treasuries. This trend is likely to continue as long as the Fed stays hawkish, boosting the attractiveness of the U.S. Dollar.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through the intraday low at .6488 will signal a resumption of the downtrend. A move through .6747 will change the main trend to up.

The minor range is .6747 to .6488. Its 50% level at .6618 is the nearest resistance. On the downside, the nearest support is the long-term Fibonacci level at .6464.

Daily Swing Chart Technical Forecast

Trader reaction to .6536 is likely to determine the direction of the AUD/USD on Monday.

Bearish Scenario

A sustained move under .6536 will indicate the presence of sellers. If this creates enough downside momentum then look for a break into the long-term Fibonacci level at .6464. Look for a technical bounce on the first test of this level, however, if it fails then look for the selling to possibly extend into the May 15, 2020 main bottom at .6402.

Bullish Scenario

A sustained move over .6536 will signal the presence of buyers. If this generates enough upside momentum then look for a surge into the minor pivot at .6618.

Side Notes

A close over .6536 will form a potentially bullish closing price reversal bottom. This won’t change the main trend to up, but if confirmed, it could trigger the start of a 2 to 3 day counter-trend rally.