AUD/USD Traders Still Facing Volatility and Possible Two-Sided Trade This Week

Despite two potentially bearish pieces of news, the AUD/USD managed to close higher last week. Firstly, on August 2, the Reserve Bank of Australia cut its benchmark interest rate by 25-basis points. This was widely expected, but the currency would’ve weakened if investors had been following economic theory.

However, this is trading and the Aussie rallied against the Greenback. This may mean the RBA will have to cut interest rates again before the end of the year to accomplish its goal of driving the currency lower to help improve the economy.

The second piece of news was the stronger-than-expected U.S. Non-Farm Payrolls report on August 5. This news was strong enough to produce a daily closing price reversal top on the daily chart, indicating the presence of sellers. Although the AUD/USD closed higher for the week, the daily closing price reversal top on Friday could lead to spillover selling early this week.

Technically, the main trend is up according to the weekly swing chart. A trade through .7675 will reaffirm the uptrend. A move through .7420 will change the main trend to down.

The higher close at .7615 has put the market in a position to challenge a downtrending angle at .7674 and a main top at .7675. The combination of these two forms a potential resistance cluster. We could see sellers emerge on the first test of this zone, however, it is also a trigger point for an acceleration to the upside with the next target a downtrending angle at .7754. This is the last potential resistance angle before the .7834 main top.

The first target on the downside is an uptrending angle at .7585. This is followed by a downtrending angle at .7514. Look for the selling pressure to increase on a move through this angle with the next major targets a long-term uptrending angle at .7426 and the main bottom at .7420.

We could continue to see volatility this week with the strong possibility of a two-sided trade. The only way will be confident about the upside is on a sustained move over .7675. Look for a longer-term downside bias to begin on a sustained move under .7585.