AUD/USD Forex Technical Analysis – Strong Counter-Trend Momentum Targets .7814 to .7860

The Australian Dollar is trading higher on Thursday after better-than-expected U.S. weekly claims data helped drive U.S. Treasury yields lower, while boosting risk appetite. This news comes on top of yesterday’s events that also pushed yields lower. These included a tame reading on U.S. inflation and a Treasury auction that was met with adequate demand.

At 14:15 GMT, the AUD/USD is trading .7772, up 0.0036 or +0.46%.

Earlier today, the Labor Department said initial claims for state unemployment benefits totaled a seasonally adjusted 712,000 for the week-ended March 6, compared to 754,000 in the prior week. Economists polled by Reuters had forecast 725,000 applications in the latest week.

As long as yields continue to move lower or stabilize, the Aussie is likely to climb. Higher rates were not the problem during the sell-off. After all, investors expect rates to move higher at some point as the global economy recovers. However, investors were mostly uncomfortable with the recent pace of the rise in yields.

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 a closing price reversal bottom on March 9.

A trade through .7621 will negate the closing price reversal bottom and signal a resumption of the downtrend. The main trend will change to up on a trade through the last main top at .8007.

The short-term range is .7564 to .8007. The AUD/USD is currently trading inside its retracement zone at .7786 to .7733. The near-term direction is being controlled by this zone.

The minor range is .8007 to .7621. Its retracement zone at .7814 to .7860 is the primary upside target. Since the main trend is down, sellers are likely to come in on a test of this area.

Daily Swing Chart Technical Forecast

The direction of the AUD/USD into the close on Thursday is likely to be determined by trader reaction to .7786.

Bullish Scenario

A sustained move over .7786 will indicate the presence of buyers. If this move creates enough upside momentum then look for the rally to continue into .7814 to .7860.

Look for sellers on the first test of .7814 to .7860. They are going to try to form a secondary lower top. Aggressive counter-trend buyers are going to try to take out .7860. This is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under .7786 will signal the presence of sellers. This could lead to a retest of .7733. If this level fails then look for the selling to possibly extend into at least .7704.

For a look at all of today’s economic events, check out our economic calendar.