AUD/USD Faces Steep Sell-off on Sustained Move Under .7354

The Australian Dollar is trading at its lowest level since March 17 on thin holiday trading early Monday. The selling is being primarily fueled by the strong U.S. Dollar. Traders, for the most part are showing little reaction to mixed, but mostly positive economic data from China.

Although the Reserve Bank of Australia (RBA) recently strongly suggested it was preparing to raise rates sooner than previously expected, the Aussie Dollar has been under pressure because the U.S. Federal Reserve is expected to be even more aggressive in its efforts to tame inflation.

Aggressive Fed Offsets RBA’s Tentative Tone

The Fed last month delivered the first in what is expected to be a series of interest rate increases this year and into next to bring down 40-year high inflation. New York Fed President John Williams said on Thursday that a half-point rate rise next month was “a very reasonable option”, while Cleveland Federal Reserve Bank President Loretta Mester signaled rates should rise quickly.

At 07:49 GMT, the AUD/USD is trading .7361, down 0.0034 or -0.46%.

China Releases Mixed, Mostly Positive Economic News

The Australian Dollar showed little reaction to economic news from China with most traders focused on the Fed.

China saw faster-than-expected GDP growth in the first quarter, data released by the National Bureau of Statistics showed Monday. First-quarter GDP in China rose 4.8%, above expectations for a 4.4% year-over-year increase.

Retail sales in March, however, fell by a more-than-anticipated 3.5% as compared with a year earlier. That was against expectations for a 1.6% fall in a Reuters poll.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through the intraday low at .7351 will signal a resumption of the downtrend. A trade through .7661 will change the main trend to up.

The minor trend is also down. A trade through .7494 will change the minor trend to up. This will shift momentum to the upside.

The short-term range is .7165 to .7661. The AUD/USD is currently testing the lower level of its retracement zone at .7413 to .7354.

The major resistance is the long-term retracement zone at .7429 to .7538.

Daily Swing Chart Technical Forecast

The direction of the AUD/USD into the close on Monday is likely to be determined by trader reaction to .7395.

Bearish Scenario

A sustained move under .7395 will indicate the presence of sellers. The first downside target is the short-term Fibonacci level at .7354. This is a potential trigger point for an acceleration to the downside with the March 15 main bottom at .7165 the next major downside target.

Bullish Scenario

A sustained move over .7395 will signal the presence of buyers. This could trigger a rally into a pair of 50% levels at .7413 and .7429.

Taking out .7429 will indicate the buying is getting stronger with the minor top at .7494 the next likely target.

Side Notes

A close over .7395 will form a potentially bullish closing price reversal bottom. If confirmed, this could trigger the start of a 2 to 3 day counter-trend rally.