AUD/USD Forex Technical Analysis – At Mercy of Sellers Amid Increasing Recession Fears

The Australian Dollar is down sharply late in the session on Tuesday as safe-haven demand strengthened the U.S. Dollar against its Australian counter-part. The catalyst behind the move is fear of a global recession. Investors also dumped commodities and stocks, driving down investor sentiment and demand for risk-linked currencies.

At 18:31 GMT, the AUD/USD is trading .6789, down 0.0076 or -1.11%. The Invesco CurrencyShares Australian Dollar Trust ETF (FXA) is at $67.49, down $0.83 or -1.21%.

Global recession fears have kept the greenback elevated even if markets have scaled back their U.S. rate hike expectations. The market is pricing in around an 85% chance of another hike of 75 basis points this month and rates at 3.25% to 3.5% by year end – before cuts in 2023.

In other news, Australia’s central bank on Tuesday raised interest rates for a third straight month and flagged more ahead as it struggles to contain surging inflation even at the risk of triggering an economic downturn. The rate hike was widely expected.

Wrapping up its July policy meeting, the Reserve Bank of Australia (RBA) lifted its cash rate by 50 basis points to 1.35%, marking 125 basis points of hikes since May and the fastest series of moves since 1994.

Short-Term Outlook

Trader reaction to .6829 is likely to determine the direction of the AUD/USD into the close on Tuesday.

Bearish Scenario

A sustained move under .6828 will indicate the presence of sellers. If this continues to generate enough downside momentum then look for sellers to pound the Aussie through the June 22, 2020 main bottom at .6811 and the June 15, 2020 main bottom at .6777.

The late session price action suggests investors are trying to prop up the Aussie, but if they fail, the currency is vulnerable to a steep break over the near-term.

The daily chart shows there is plenty of room to the downside if the next major target the May 15, 2020 main bottom at .6402.

Bullish Scenario

A sustained move over .6829 will signal the presence of buyers. If this move creates enough upside momentum then we could see a late-session short-covering rally into a short-term retracement zone at .6916 to .6952.