AUD/USD Forex Technical Analysis – Next Major Target: .7726 to .7633 Retracement Zone

The AUD/USD closed lower last week, pressured by rising U.S. Treasury yields and expectations for another Fed interest rate hike in December. The moves make the U.S. Dollar a more attractive investment. Fed Chair Janet Yellen was the catalyst behind the strength in yields. She gave a hawkish speech which supported the notion of higher interest rates.

This week, Yellen will speak against on Wednesday. Traders will be listening for comments about interest rates and monetary policy. On Friday, the U.S. will release the latest data on Non-Farm Payrolls. Investors will be particularly interested in the Average Hourly Earnings figure.

The Reserve Bank of Australia is expected to leave its benchmark interest rate unchanged when it holds its meeting on Tuesday. Later in the week, investors will get the opportunity to react to Australian Retail Sales and Trade Balance.

Weekly Technical Analysis

The main trend is down according to the weekly swing chart. The trend turned down last week when sellers took out the last swing bottom at .7807. The new swing top is .8124.

The main range is .7329 to .8124. Its retracement zone at .7726 to .7633 is the primary downside target. We may see a technical bounce on the first test of this zone because it represents a value area.

Weekly Forecast

Based on last week’s close at .7830 and the price action, the direction of the AUD/USD this week is likely to be determined by trader reaction to the steep downtrending angle at .7804.

Opening and holding above .7804 will indicate the presence of buyers. If the buying becomes strong enough, we could see a move back to the next downtrending angle at .7964.

Crossing to the weak side of the angle at .7804, however, will signal the presence of sellers. This could drive the AUD/USD into the long-term uptrending angle at .7749. This is followed by the main 50% level at .7726.

Watch for a technical bounce on the first test of .7726, but also be prepared for an acceleration to the downside if this level fails as support since the next major target is the Fibonacci level at .7633.

Basically, look for a counter-trend rally on a sustained move over .7804 and a bearish tone to develop on a sustained move under .7804.