AUD/USD Forex Technical Analysis – July 4, 2016 Forecast

Although the AUD/USD closed higher on Friday and for the week, having retraced more than 50% of the Brexit sell-off, it could open lower on Monday due to the uncertain outcome of Saturday’s federal election, which heightened fears Australia could be consigned to three years of minority government and paralysis on budget reform.

The biggest fear that could cause early market jitters is that the election stalemate move Australia a step closer to losing its vaunted Triple-A credit rating after a deeply divided electorate left the country in limbo and foreshadowed a hung parliament where no party holds outright party.

On the other hand, there are some who are saying “who cares about the credit rating?” Given the situation in the U.K., global investors hungry for yield above all, are going to be far less concerned with perks such as credit ratings. Especially since, the S&P credit rating agency stripped Britain of its top rating and many German and Japanese bonds are paying less than nothing.

Nonetheless, the market doesn’t like uncertainty and the election result may have delivered a boatload of excuses to sell the Aussie and create better-than-average volatility. The fact that U.S. banks will be closed on Monday due to a holiday could add to the expected volatile trading conditions.

Technically, the main trend is up according to the daily swing. Although there was a temporary shift in momentum to the downside immediately after the Brexit vote, the Aussie has recovered more than 50% of the sell-off.

Two ranges should come into play today. The first is .7285 to .7645. Its retracement zone is .7465 to .7422. The second is .7645 to .7301. Its retracement zone is .7473 to .7514. This zone is currently being tested. Trader reaction to this zone is likely to determine the direction of the AUD/USD today and perhaps the week.

Based on Friday’s close at .7497, the first target is the short-term Fib level at .7514. This is followed by a resistance cluster at .7525. This cluster is very critical. It is also the trigger point for an acceleration to the upside with the next major target angle coming in at .7585.

The inability to overcome .7514 will indicate the presence of sellers. This could trigger a fast break into a pair of 50% levels at .7473 and .7465. Look for another steep drop if .7465 is taken out with conviction with the next target a potential support cluster at .7422.

The best support angle and downside target today is an uptrending angle at .7405. This angle has helped guide the AUD/USD higher since June 24. Taking it out could drive the market into a pair of slow-moving angles at .7345 to .7315. These are the last two potential support angles before the .7301 low and the .7285 main bottom.

Watch the price action and read the order flow at .7514 and .7473 today. Look for an upside bias to develop on a sustained move over .7514 and a downside bias under .7473.