AUD/USD Forex Technical Analysis – Bearish Tone as Aussie Approaches .7135 – .7101 Key Support Zone
The risk-sensitive Australian Dollar is getting hit hard early Thursday as investors tightened the odds of an early Federal Reserve rate hike and a faster pace of stimulus withdrawal, making the U.S. Dollar a more attractive investment.
The selling pressure started on Wednesday after minutes of the Federal Reserve’s last meeting hinted they might hike rates as early as March, when analysts thought May or June were more likely start dates.
The FOMC minutes not only suggested policymakers favor a faster pace of rate hikes to combat stubbornly high inflation, but also an accelerated shrinkage of the Fed’s balance sheet. For investors holding riskier assets like the Aussie Dollar, this is a game-changing move.
At 09:35 GMT, the AUD/USD is trading .7157, down 0.0065 or -0.90%. On Wednesday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $72.07, up +0.23 or +0.32%.
Essentially comes down to the divergence between the U.S. Federal Reserve and the Reserve Bank of Australia. The Fed is hawkish and the RBA is dovish. This is causing rates to move up faster in the U.S. than in Australia, thereby making the U.S. Dollar more favorable at this time.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart, however, momentum is trending lower. A trade through .7083 will change the main trend to down. A move through .7277 will reaffirm the uptrend.
The minor trend is down. This is controlling the momentum.
On the upside, the first resistance is a pair of 50% levels at .7182 and .7212. The major resistance zone is .7275 to .7341.
On the downside target, the first support target zone is .7135 to .7101. Buyers could come in on the first test of this zone. But if it fails then start preparing for an acceleration to the downside.
Daily Swing Chart Technical Forecast
The direction of the AUD/USD on Thursday is likely to be determined by trader reaction to .7182.
A sustained move under .7182 will indicate the presence of sellers. This could trigger an intraday break into .7135 to .7101.
Watch for buyers on the first test of .7135 to .7101. They will be trying to defend the main bottom at .7083. Taking out this level will change the main trend to down. This could trigger an acceleration into the support cluster at .6993 – .6991.
Overcoming and sustaining a rally over .7182 will signal the presence of buyers. This could lead to a quick test of .7212.
With the bearish wheels in motion, any rally should be treated as a shorting opportunity. Professionals don’t like shorting weakness. They prefer to sell counter-trend rallies.